Shrinkage in the tenge?

Shrinkage in the tenge?

The Kazakhstani tenge, or KZT, the currency of Kazakhstan, is affectionately known by London traders as the ‘Borat’, according to Macro Man, a local punter. Wednesday, the Kazakh central bank decided to allow the tenge to drop by roughly one-fifth, in a devaluation it alleged was triggered by falling world oil prices (which are some 60% of Kazakhstan’s foreign exchange income) and the sharp depreciation of the Russian ruble which decreased the competitiveness of its Kazakh produced goods. Hitherto, the bank had used approximately $6bn of its foreign exchange reserves since October defending the tenge, including $2.7bn in January alone, according to the Financial Times. The situation can be contrasted with that of the ruble, which has fallen by one-third against the dollar since last summer, but which is still being defended by Russia’s central bank, to the chagrin and surprise of some who lament the wasting of reserves against what might be considered the currency’s inevitable decline. The ‘Borat’ will now be allowed to fluctuate by about 3% around a new level of 150 against the dollar, a level which Katya Malofeeva, chief economist at Renaissance Capital in Moscow, guessed it should be able to hold.

Per Macro Man, the fall from grace has tarnished yet another ‘sexy long’:

“Yet another emerging market currency has been splattered today, as the Kazakh tenge has finally been devalued by 20% after months of pressure. The KZT was in vogue a couple of years ago as a sexy long, but another one of Macro Man’s rules of thumb is never to trade a currency named after a movie character. The pressure on the KZT has been mirrored in “real” markets, where the (Central and Eastern European) currencies such as HUF and PLN have been obliterated in the past few days, with market liquidity collapsing. So the Great Unwind has further to go.”

So what will bring sexy back in 2009? Anything?