for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Oil Report

WRAPUP 2-Crisis-hit Kazakhstan devalues currency 18 pct

* Kazakhstan devalues tenge by almost a fifth

* C.bank says will defend tenge around 150 per dlr

* C.bank cuts rates, loosens minimum reserve requirements (Adds details, updates currency movements)

ALMATY, Feb 4 (Reuters) - Kazakhstan’s central bank radically widened the tenge’s trading corridor on Wednesday, allowing the currency to drop by almost a fifth from the previous day’s close.

The once-robust, oil-fuelled economy -- Central Asia’s biggest -- has been hit hard by the global financial crisis which has brought economic expansion virtually to a standstill and left the central bank struggling to prop up the tenge.

On Wednesday, the currency slumped to 149.5 against the dollar as of 0700 GMT after briefly piercing 150 per dollar on the Kazakh Stock Exchange AFINEX02, a drop of more than 18 percent from Tuesday.

It had traded around 122-123 to the dollar on Tuesday.

The central bank said it would now allow the tenge to fluctuate by around 3 percent, or five tenge, around the new level of 150 against the dollar.

“We have reached a new market equilibrium level and we will defend it,” Central Bank Chairman Grigory Marchenko told a news conference.

The central bank had long been expected to devalue the tenge in line with the Russian rouble, which has lost about a quarter of its value since last October as analysts drew parallels between the two neighbouring countries’ oil-driven economies.

Like Russia, Kazakhstan has been able to defend the tenge using forex reserves built up during years of windfall export revenues.

But Marchenko’s re-appointment as central bank chief last month signalled that Kazakhstan would take more assertive steps to try to improve the competitiveness of the $100 billion economy.

The government sees growth in 2009 of around 2 percent, while the International Monetary Fund sees it running at half that pace, or just 1 percent. This would compare with the government’s preliminary estimate that growth slowed in 2008 to just above 3 percent from close to 9 percent in 2007.

This week's effective nationalisation of biggest bank BTA BTAS.KZ and No.4 bank Alliance ALLBq.L has paved the way for more decisive steps towards tenge devaluation to boost Kazakhstan's competitiveness -- a move praised by analysts.

“...Events this week suggests that Marchenko is a ‘man with a plan’, which is encouraging,” RBS analysts wrote in a note.

“In any event, the move by the (central bank) today is a credit-positive event, as it suggests that the Kazakh authorities will conserve FX reserves ... to meet external liabilities falling due.”

The central bank said separately in a statement it had used a total of $6 billion to support the tenge starting with the last quarter of 2008.

It said it had also decided to cut its refinancing rate to 9.5 percent from Feb. 5 from the previous rate of 10 percent and to loosen minimum reserve requirements for banks to free up about 50 billion tenge ($333 million) in funds.

Marchenko’s reappointment has rekindled memories of 10 years ago when he took over at the central bank for the first time shortly after the tenge shed a third of its value following a 1998 financial collapse in neighbouring Russia.

“I started working at the central bank last Monday,” Marchenko said. “As you can see, we have already done quite a lot within these 10 days.”

Writing by Maria Golovnina; Editing by Neil Fullick

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up