Kazakhstan's central bank on January 17 held its benchmark interest rate at 15.25% despite the Kazakhstani tenge (KZT) hitting a series of all-time lows throughout the month.

Its decision came as the country’s latest consumer prices report showed annual inflation edged up to 8.6% in December from 8.4% in November. It was the highest reading since July.

The central bank also announced that it is to commence selling dollars in a way that mirrors its gold purchases from domestic producers.

“These measures will create additional supply on the foreign exchange market, which will also contribute to balance in the domestic currency market,” National Bank of Kazakhstan governor Timur Suleimenov told reporters in Astana, as reported by Bloomberg.

The KZT has been impacted by global dollar appreciation, growth in consumer demand for FX that nearly doubled from previous years and negative sentiment generated by the tightening of US sanctions against Russia, according to the central bank. The tenge closely tracks changes in the value of the Russia ruble.

As part of the defence mounted for the tenge, state-run companies were ordered in November to sell half of their foreign-currency revenue to support the currency. Sales were expected to total around $500mn a month, according to Halyk Finance.

Also, in November, policymakers spent more than $1bn to boost the tenge. The previous occasion the central bank burnt through some dollar holdings to back the currency was in March 2022.

On January 15, Kapital.kz published responses to questions from the deputy chair of the national bank Aliya Moldabekova, who partly tied the weakening of the tenge to the new round of sanctions against Russia—an economy that Kazakhstan is still significantly reliant on—introduced earlier this month by the outgoing US Biden administration.

“To now, the fundamental factors that exerted pressure, such as, for example, the continuing strengthening of the dollar, have not changed significantly. However, there is continuing pressure and increased demand for dollars, which is not due to the action of fundamental factors and may only be short-term. At the moment, we see that the main factor of tension in the currency market has become additional anti-Russian sanctions that were announced at the end of last week, which led to high demand for foreign currency from market participants, including individuals,” Moldabekova was cited as saying.

She also noted that, in the opinion of the central bank and the government, the new sanctions against Russia do not have a direct impact on the economy of Kazakhstan or its currency market. However, she added, the focus on negative news led to a certain nervousness and, as a result, many people began to actively buy FX.

Kazakhstan’s gold and FX reserves grew to $44.2bn as of November 2024, marking a 23.1% y/y increase, the central bank told Kazinform last week. As of December, gold made up slightly more than half of the nation’s total reserves at $23.8bn.