Crude is greasing the wheels of one of the world’s best-performing exotic currencies.
Kazakhstan’s tenge, which has racked up the biggest advance among its thinly traded counterparts the past six months, is poised for more gains as demand increases following the rally in the price of oil, the former Soviet republic’s No. 1 export, according to BMI Research.
Bank of America Merrill Lynch is also a fan, saying earlier this month that the tenge could climb 15 percent this year, thanks to elevated crude prices.
The tenge has risen more than 6 percent since the middle of August last year, putting it well in front of its nearest competitors — the Lesotho loti and Swaziland lilangeni — when it comes to exotic-currency gains, data compiled by Bloomberg show.
Following a seven-day rally, the tenge closed at 318.80 per US dollar on Friday, close to its highest level since the end of 2015.
After breaking resistance at 326 per US dollar late last month, there are now no clear near-term resistance levels between the tenge’s spot rate and 195 per US dollar, the level the currency traded at before the central bank shifted to a free float in 2015, analysts at BMI, a unit of Fitch Group Inc., wrote in a research note dated Thursday last week.
Given that oil prices probably will not rise much in the near term, the scope for further gains in the tenge could be circumscribed, BMI said.
The group forecasts crude averaging US$57 a barrel this year and US$60 next year. Brent has advanced 14 percent over the past six months. US drilling activity poses a headwind for oil prices.
Oil output in Kazakhstan, central Asia’s largest energy producer, has picked up this year with the resumption of pumping at the Kashagan field, which is set to push out 370,000 barrels a day by the end of this year, said its operator, North Caspian Operating Co NV.
Last month, Kazakhstan produced 1.67 million barrels of oil a day.
The tenge could appreciate toward 310 per US dollar by the end of this year, before averaging 302.50 next year and 290 in 2019, BMI forecasts.
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