Cheap dollars: is it worth buying American currency now

For two weeks we have been watching the rapid decline of the dollar. Since April 18, 2024, the dollar has fallen in price by 9 tenge against the tenge. What will happen next and whether it is worth running to banks and buying up currency now, he says Zakon.kz .

First, you need to try to understand why the dollar is falling, how much more it can fall and how long this trend will last.

Tax fees, expensive oil and a strong ruble

According to Askar Kysykov, director of the Talap Center for Applied Research, one of the main reasons for the growth of the tenge exchange rate is the activity of the National Bank of the Republic of Kazakhstan. Despite the declaration of a free exchange rate, the NBK actively intervenes in exchange rate policy through not direct currency interventions, but using funds from the National Fund and the UAPF, the expert believes.

"The current strengthening of the tenge exchange rate is due to the fact that the funds of the National Fund are actively being sold in the foreign exchange market. This is done due to non-fulfillment of the republican tax budget and it is necessary to finance current expenses. The government is implementing guaranteed transfers at an accelerated pace, and this, of course, strengthens the tenge exchange rate."Askar Kysykov
Currently, tax revenues to the treasury amount to only 16% of GDP, while government expenditures amount to about 23% of GDP, the analyst noted.

The words of the expert were confirmed by the National Bank.

"Currency sales from the National Fund to ensure transfers to the republican budget in April amounted to $ 1,056 million. The share of sales from the National Fund amounted to 21% of the total trading volume and no more than $ 48 million per day," the NBK said in a release.

Another reason for the rise in the price of tenge, according to Kysykov, is the strong ruble, since the economies of Russia and Kazakhstan are very strongly connected with each other. Today, the ruble is extremely strong, and this is a great support for the tenge.

"Historically, the ratio of the ruble to tenge is one to five. And if suddenly, for some reason, the ruble falls, the National Bank of the Republic of Kazakhstan is likely to start releasing tenge."Askar Kysykov

USD/KZT (NBK). Photo: nationalbank.kz

At the same time, it is encouraging that the formation of the tenge exchange rate is less influenced by oil prices, the analyst notes.

"We saw how oil prices "floated", but the tenge did not experience strong fluctuations. This is largely due to the fact that the tenge exchange rate has also become a political phenomenon. It determines the rate of inflation, which means stability in society."Askar Kysykov

Will the tenge fall again?

According to Askar Kysykov, it is quite difficult to predict the further behavior of the exchange rate. However, there are two trends for which approximate forecasts can be made.

The first trend is that our national currency is bound to gradually fall against the dollar. And there are no reasons that the dollar will begin to weaken against the tenge in the foreseeable future. The second reason is that the budget of the Republic of Kazakhstan for 2024 included a dollar value of 460 tenge.

Interestingly, analysts predict a different exchange rate: 

"If the government adheres to the previously established limits on transfers in the amount of 3.6 trillion tenge in 2024, this will sharply reduce monthly currency sales from the National Fund and lead to a weakening of the tenge. In this case, our forecast for the exchange rate at the end of 2024 at 485 tenge per dollar looks quite realistic." 

So is it necessary to buy dollars urgently today?

Here you need to understand why you need American money. If the goal is to protect against possible depreciation of tenge, then you need to buy. And if the goal is to earn money, then you need to either operate with millions of dollars, which, you see, not everyone has, or not just buy and then sell dollars, but invest in dollar assets. 

On the other hand, it is not necessary to invest in hard currency today, analyst Vladislav Antonov believes.

"Let's do the math. If in a year the dollar grows even to 585-590 tenge, it will only amount to an increase of 7% percent. But you can also open a deposit in a bank at 16% for six months and make good money on a tenge deposit."Vladislav Antonov

In general, it is always necessary to observe a reasonable and long-standing principle: do not put all your eggs in one basket. It is more profitable to keep some of your savings in tenge, some in foreign currency, and some in other assets.