The probability of rising interest rates in the United States increases the potential costs to support the tenge rate - Moody's

Almaty. August 25. Silkroadnews - The probability of rising interest rates in the United States increases the potential costs of maintaining a stable exchange rate of the national currency of Kazakhstan against the dollar, said the Moody's Investors Service.
As recalled by the rating agency, last Thursday, Kazakhstan (rated Baa2 / stable) moved to the exchange rate determined by the market, abandoning its previous management practices in foreign exchange rates.
"Therefore, tenge depreciated by 26%, to 252 tenge per dollar from 188 at the beginning of the week", - underlined in the text.
Despite the fact that the depreciation of the currency will increase the cost of debt in foreign currency for corporations and weaken asset quality and capital adequacy of banks, it will allow the economy to adapt to the lower price of oil, analysts said.
"The flexible exchange rates will help to support the competitiveness of the trade. In addition, maintaining a stable exchange rate could lead to depletion of foreign exchange reserves, the flexibility of the exchange rate maintains reserves", - the report says.
According to Moody's, from the middle of 2014 a sharp drop in oil prices and the decline in value of the Russian ruble, Ukrainian hryvnia and the euro against the US dollar negatively impacted the external revenues of Kazakhstan's competitiveness and growth prospects.
Since the government of Kazakhstan has maintained a relatively stable value of the tenge against the US dollar, the real effective exchange rate in Kazakhstan was 20% higher at the end of June 2015 than it was a year earlier.
"This has lowered the competitiveness of trade, showing a decline of exports of non-oil sector by 27% between January and April. In August, the devaluation of several emerging market currencies and the situation with the yuan in China put pressure on the real exchange rate in Kazakhstan", - stated in the text.
In addition, Kazakhstan has spent $28 billion since the beginning of 2014, mainly due to currency swap contracts and repurchase agreements with commercial banks to protect its exchange rate, says the analyst Moody's.