Kazakhstan’s currency Tenge just lost more than 20 per cent of its value at the start of trading, about an hour after the surprise announcement that the government would allow the currency to float freely.
One dollar is now worth 257.7 tenge, taking its year-to-date plunge to nearly 30 per cent.
The Kazakh central bank scrapped the trading band for the tenge early on Thursday, just one day after the Kazakh central bank widened the currency’s trade band and allowed it to weaken 4.7 per cent to 196.88 per dollar, the lowest since at least 1994.
Overnight, the oil-dependent central Asian country trades heavily with Russia and China and is being buffeted by the fall in the rouble and crude prices.
The twin moves to reform how the currency trades comes within nine days of China devaluing the renminbi and changing the way it will be fixed each morning, ostensibly to give more voice to markets.
Kazakhstan’s move to widen the trading band followed in the footsteps of Vietnam, which has expanded the trading band for the dong twice since August 11. Kazakhstan’s move to freely-float the tenge goes a major way forward and could fuel more worries of an unintended currency war sparked by China.