BofA Sees Further Upside for Kazakhstan’s Tenge Despite Recent Rally

Key Moments

Valuation and Macro View on the Tenge

Bank of America reaffirmed its positive assessment of Kazakhstan’s economy and the KZT. Therefore, the currency could continue to strengthen even after recent gains.

According to BofA’s valuation framework, the tenge remains mispriced. It trades at roughly a 4% discount to its modeled value. The bank sets a “fair value” of KZT480 per U.S. dollar. Previously, it shared this constructive view in the report “Kazakhstan Viewpoint.”

Policy Support and FX Market Dynamics

One of the central supports for the tenge, according to Bank of America, is Kazakhstan’s tight monetary policy stance. The currency is also being underpinned by active foreign exchange operations conducted by the National Bank. These interventions are described as substantial, with total daily activity remaining elevated at $60-65 million per day.

Positioning Versus Other EM Currencies

Bank of America notes that investors hold lighter positions in the tenge. This contrasts with the Nigerian naira (NGN) and Egyptian pound (EGP). This less crowded exposure is viewed as leaving additional room for the KZT to appreciate, in contrast to currencies where positioning is already more concentrated.

Seasonality and Near-Term Prospects

Seasonal patterns are also cited as a supportive factor. The tenge has historically exhibited stronger behavior during the December through February period, while tending to underperform between July and September. Bank of America notes that this favorable seasonal backdrop could help underpin the currency in the coming weeks and may even result in the KZT moving into what it describes as “overvalued territory” for a time.