CIS-4: Currencies remain supported, selective rate cuts still possible
The desk observes a sustained bullish outlook for currencies in commodity-exporting CIS markets, driven by higher fuel prices and increased carry trade activity. Per the full note , Azerbaijan particularly stands to benefit from elevated hydrocarbon revenues, which bolster its fiscal and current account positions. Kazakhstan presents a mixed outlook, where rising oil prices provide support yet production challenges could limit longer-term benefits. With no high-impact events on the immediate horizon, the focus will remain on regional fundamentals and carry dynamics.
What the desk is arguing
The desk maintains a positive short-term view on CIS currencies, noting that higher fuel prices and carry trades are pivotal to this outlook. Per the full note , Azerbaijan's strong fiscal position, driven by robust hydrocarbon revenues, positions its currency favorably amidst rising inflation risks.
While Kazakhstan experiences nominal export growth due to elevated oil prices, production cuts might dampen the broader economic impact. The tenge has benefitted from substantial non-resident portfolio inflows, further underpinning the desk's constructive view on KZT's near-term trajectory.
Where it sits in our coverage
Our consensus target stands at 1.075, with a range of 1.04 to 1.12 across several firms. Specific Dec-26 targets include: - jpmorgan: 1.10 - bofa: 1.04
This outlook aligns closely with jpmorgan's target and sits towards the upper end of the spread, indicating an optimistic stance particularly on high-yielding currencies amidst selective rate policies.
How other firms see it
Firms such as jpmorgan are aligned with the desk’s bullish stance on CIS currencies, thereby supporting the short-term bullish outlook. Conversely, bofa takes a more cautious view, indicating potential weakness in their targets.
Investors should also monitor the dynamics of USD/KZT and EUR/USD, as shifts in central bank policies or global risk sentiment could significantly influence these pairs' movements.
What the calendar says
No significant events are scheduled in the immediate future that would affect our analysis of these currencies, maintaining focus on the current macroeconomic landscape and existing trends.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01CIS currencies, particularly the manat and tenge, benefit from elevated fuel prices.
- 02Azerbaijan's strong fiscal health contrasts with Kazakhstan's mixed outlook due to production challenges.
- 03Rising inflation risks are manageable with selective rate decisions anticipated.
- 04Strong portfolio inflows in Kazakhstan may amplify sensitivity to shifts in carry trade dynamics.
Market implications
Investors should watch for continued support around the KZT and manat as market interest remains high due to carry trade dynamics, positioning around 1.075 could be pivotal. Grounded fiscal fundamentals could buffer against shifts in risk sentiment.
Risks to this view
A sharper than anticipated drop in global oil prices or production setbacks in Kazakhstan could jeopardize the bullish outlook for these currencies, forcing a reassessment of their trajectories.
Articles CIS-4: Currencies remain supported, selective rate cuts still possible Published 11:31 Armenia Azerbaijan Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Higher fuel prices and persistent carry trade reinforce our constructive near-term FX outlook for commodity exporters and high-yielding CIS markets. Inflation risks are also rising, but domestic buffers should prevent a uniformly hawkish shift, keeping regional rate decisions selective – between a hold and a cut Dmitry Dolgin Azerbaijan, which is benefiting from higher fuel prices Commodity support uneven The revised global outlook combines a higher near-term fuel price trajectory with renewed Black Sea disruptions. Azerbaijan is the clearest beneficiary: stronger hydrocarbon revenues reinforce already substantial fiscal and external buffers, leaving the budget and current account in high surplus while keeping the manat firmly pegged.
Kazakhstan receives a less straightforward boost. Higher oil prices support nominal export receipts, but disruptions to the CPC route have forced the authorities to lower the 2026 production target. Even so, according to our estimates, annualised crude exports remain around 10% above their 2021-22 post-pandemic level, cushioning the external accounts and the tenge.
The tenge also benefits from portfolio inflows. Kazakhstan’s large interest rate differential , declining inflation and prospects of Euroclear access have strengthened demand for local government debt. Non-resident holdings have been growing rapidly since 4Q25 and reached $5.4bn as of July 2026, or 8.9% of the overall market.
This supports our constructive near-term KZT view, while also increasing sensitivity to any reversal in carry flows, especially given the declining state involvement in the forex market. Uzbekistan’s soum has also outperformed. Gold exports restarted at $1.3bn in July, restoring an important source of foreign currency supply and partly offsetting softer gold prices.
Persistently high real interest rates provide additional support for capital inflows. We have therefore improved our near-term UZS expectations alongside the KZT. KZT and UZS keep outperforming underlying commodities thanks to portfolio inflows Dynamics of commodities and floating CIS FX vs.
USD (rebased) since the outbreak of the Iran war Source: Refinitiv, CEIC, national sources, ING "> Source: Refinitiv, CEIC, national sources, ING Inflation risks rise, but from different starting points Higher global energy and food prices, combined with upward pressure on core rates, raise risks to inflation and policy-rate trajectory across the CIS-4. The implications are not uniform, however. Inflation in Armenia and Azerbaijan is rising from a relatively low base of 4-6%.
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