Kazakhstani Tenge Weakens Amid Rate Cut and Oil Price Decline Following Strait of Hormuz Opening

The Kazakhstani tenge has weakened significantly against the US dollar, declining more than 6.5% since late April when it reached a strengthening peak of 458.73 tenge per dollar. As of June 18, the currency traded at 487.2, marking a departure from the broader trend in emerging markets where the dollar has remained relatively stable or weak. The National Bank of Kazakhstan's unexpected interest rate cut from 18% to 17% on June 5 has emerged as a key factor in the currency's deterioration. The rate reduction, justified by improving inflation dynamics, contradicted market expectations that had been bolstered by strong foreign investment inflows averaging approximately $200 million over the preceding six months. However, May saw a net outflow of non-resident capital, coinciding with the surprise rate announcement.

Oil prices have become another critical driver of tenge weakness. Following the signing of a US-Iran memorandum of understanding on June 18, which aims to halt Middle East hostilities and open the Strait of Hormuz, crude oil prices have declined sharply. Brent crude fell from $98.9 per barrel on June 3 to $79.5 by mid-June, with prices briefly touching $76.66—the lowest level since the conflict began. This oil price collapse, coupled with seasonal factors including tax payment cycles and pension fund foreign currency purchases (which totaled $502 million in April and $878.5 million in May), has placed additional downward pressure on the tenge.

Analysts and investment banks are divided on the currency's trajectory. ING described the interest rate cut as a "surprise," noting that high real interest rates had previously attracted international investors to tenge-denominated instruments. Investment banks expect the tenge to reach approximately 500 per dollar by year-end. The outlook depends heavily on oil prices, with the National Bank forecasting Brent at $90.1 per barrel for 2026, while Goldman Sachs and Morgan Stanley project $80-90 per barrel. Deutsche Bank previously characterized the tenge as undervalued despite calling it a "safe haven" in March due to Kazakhstan's substantial forex reserves and balanced current account. If Brent stabilizes around $80-85 per barrel, analysts suggest the tenge could continue a gradual depreciation toward the 500 level.