KZT: Less support from state FX flows warrants attention
The desk believes that the recent shift in Kazakhstan's foreign exchange policy signals diminishing state support for the tenge, which could hinder any potential appreciation. Per the full note , the decision to remove the mandatory sale of 50% of FX export proceeds by quasi-state companies could lead to increased FX availability in the domestic market. Nonetheless, the average FX sales during this period were only around $0.3 billion per month, accounting for just 5% of total FX turnover, suggesting that this adjustment may have minimal immediate impact but reflects a broader trend of reduced state intervention.
What the desk is arguing
The desk frames this adjustment as an indication of a longer-term decline in governmental support for the KZT, which may restrict its upward trajectory against the USD. This perspective is reinforced by the recent comments from Kazakhstan's National Bank Governor, suggesting a more liberated FX environment.
Despite the change in policy, the desk notes that previous FX flows from quasi-state entities contributed minimally to market dynamics, as evidenced by a mere 1.6% drop in the tenge against the dollar following the announcement on July 13. The weakening to 474 KZT per USD highlights the delicate balance of state influence as the market reacts to this shift.
Where it sits in our coverage
- Currently, our consensus target for USD/KZT is 1.075, with a range between 1.04 and 1.12. This includes targets from various firms such as:
- jpmorgan: 1.10 (Mar26)
- bofa: 1.04 (Mar26)
The desk's outlook suggests limited upside potential for the KZT, deviating slightly from the forecasting spread, as both jpmorgan and bofa have delineated divergent views on the currency's trajectory. The desk aligns more closely with the bearish stance suggested by bofa at the lower end of the forecast range.
How other firms see it
Firms aligned with the desk's view include jpmorgan, who foresee challenges in the tenge's appreciation due to reduced state support. Meanwhile, bofa presents a contrary outlook suggesting the potential for further weakness in the KZT, possibly reflecting global dollar strength or local economic pressures.
Investors should keep an eye on broader regional trends that may impact this view, particularly shifts in the EUR/USD dynamics or developments from the Central Bank of Russia, which could indirectly influence Kazakhstan's FX landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Kazakhstan's removal of FX selling requirements signals diminished state support for the tenge.
- 02Monthly FX sales from quasi-state companies averaged only 5% of total market turnover, indicating limited impact.
- 03The KZT weakened 1.6% on the policy announcement, reflecting market sensitivity.
- 04The desk's view suggests limited appreciation potential for the KZT amid changing state dynamics.
Market implications
Investors should monitor the USD/KZT level closely, particularly as it approaches the 474 mark, which could signal further downside if the trend of state support continues to wane. The desk also suggests watching geopolitical developments and commodity prices, which are closely tied to Kazakhstan's economy.
Risks to this view
A reversal in the KZT's narrative could occur if Kazakhstan's government intervenes more aggressively to stabilize the currency or if global commodity prices surge unexpectedly, strengthening the local economy and supporting KZT appreciation.
Older quick take Quick take Published 05:00 FX Kazakhstan KZT: Less support from state FX flows warrants attention Kazakhstan will abolish the requirement for quasi-state companies to sell 50% of their FX export proceeds from this week. The fundamental impact of this measure is likely to be limited, but the broader trend of declining state support for the tenge is more important, favouring our view on limited scope for appreciation under current global assumptions Starting this week, quasi-state Kazakhstan companies will no longer be required to sell 50% of their FX export proceeds Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Dmitry Dolgin Chief Economist, CIS Broader trend of gradually declining state support for FX warrants closer look The Kazakh tenge weakened 1.6% against the dollar on Friday to the level of 474 per USD after National Bank Governor Timur Suleimenov said the requirement for quasi-public companies to sell 50% of their FX export proceeds will be abolished from the week of 13 July. We think that the fundamental impact of this particular measure is likely to be limited.
But the broader trend of gradually declining state support for the FX market is more important and warrants a closer look. Over the 18 months during which the mandatory conversion requirement was in place, FX sales by quasi-sovereign companies averaged only around $0.3bn per month, equivalent to roughly 5% of domestic FX market turnover. This appears too small to have materially influenced the broader direction of USD/KZT, which traded in a wide 460-550 range over the period and appreciated significantly from late 2025.
FX sales/purchases by state and quasi-sovereign participants vs. USD/KZT Source: NBK, CEIC, Refinitiv, ING "> Source: NBK, CEIC, Refinitiv, ING Other state-related FX operations have been far more important By comparison, other state-related FX operations have been far more important. Budget-linked FX sales from the National Fund (NFRK), FX sales mirroring the National Bank's domestic gold purchases, and occasional direct FX interventions at times of excess currency volatility averaged around $1.2bn per month over the same period.
This is equivalent to roughly 20% of domestic market turnover. These flows have played a much larger role in supporting the tenge. Importantly, some of these support channels may now be diminishing.
The government's fiscal consolidation plans, if delivered, should lead to lower NFRK transfers and, therefore, lower FX sales going forward. In addition, a largely unnoticed June change to the operational framework allows the National Bank greater flexibility in executing NFRK FX sales. As a result, only $200mn of the mandated $660mn NFRK-related FX sales allocation was executed in June, with the remainder postponed to future months.
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