August 22, 2015
Director of the analytical department of “Alpari” a multinational foreign exchange, precious metals and CFD broker
Translated for Fort Russ by Soviet Bear
After Russia, Kazakhstan has also implemented a floating exchange currency rate. As a result, at the auction on August 20th a large-scale devaluation of tenge has occurred.
Both ruble and tenge are commodity currencies. The continuing fall in oil prices has affected currency rates of the two neighboring countries. While oil prices won’t recover above $100/bbl. Russian Federation, and Kazakhstan are not in a good position.
The situation in Belarus is also not the best, the Republic is heavily dependent on debt refinancing. Of course, currency crisis, comparable to Kazakhstan is hardly possible there. However, the Belarusian economy is heavily dependent on exports to Russia and money transfers from citizens, who are employed in Russia and Kazakhstan.
It can be concluded that Belarus, the Russian Federation, and Kazakhstan are in the same boat. The economies of the three countries are closely related to each other and strongly tied to the economy of the Russian Federation, as the largest of them. From our point of view, the best financial answer to a currency crisis is more rapid economic integration, and especially – the implementation of a single Eurasian currency, Altyn.
Initially, the currency, of course, will be weak. Neither the Russian ruble, Belarusian ruble nor tenge can be called a strong currency. However, the gradual formation of a unified internal Eurasian market of goods and services that are not tied to exports, and changes in the external environment will ultimately play in favor of the new currency. Naturally, the appearance of Altyn is primarily a political, not an economic decision. It will be made by the presidents of the three countries.
There are a lot of benefits in moving to a single Eurasian currency. Citizens and businesses will not be losing money on the currency exchange and bank fees. Naturally, the companies will not take foreign exchange risks, which is especially important for mutual trade between the countries. The single currency will also contribute to more rapid formation of a unified capital market. A single stock market will be formed, probably at the Moscow exchange, and the Eurasian Central Bank will be in Almaty.
Altyn is unlikely to be similar to the Euro. Key decisions in the Eurasian Central Bank, probably, will be accepted unanimously by ministers or heads of central banks of all three countries. Of course, first it has to be a non-cash Altyn and only after a year or two the cash Altyn will appear . In this respect, the European experience of transitioning to the Euro is very useful.
In the future Armenia and Kyrgyzstan can join the monetary union of Belarus, Russia and Kazakhstan. However, this is the second stage of the Eurasian monetary integration.
In conclusion, we should say that oil price below $ 50./Barr. looks heavily oversold. So – the worst days for commodity-driven economies of Russia and Kazakhstan are probably over.