Weekly Forex Review (05/01/2023-05/05/2023)

The tenge exchange rate showed multidirectional dynamics and closed the week at 445.3 tenge per dollar last week. The national currency strengthened under the influence of internal factors mainly due to an increase in the volume of currency conversion of the NBK. So, the conversion volume was $ 600 million in April, and in May it will be $ 750-800 million. Given the smaller number of working days, this will increase the daily volume of conversions and hence the supply of foreign currency on the market. At the same time, the external conditions last week were negative.

Amid expectations about the decision on the US Federal Reserve rate, the Dollar Index fell to 101.3 p. The Index slightly strengthened after the announcement of the decision to raise the rate by 25 bps, but ended the week with a weakening. The Head of the Fed announced a possible pause in further rate hikes, which also affected the dynamics of the Dollar Index.

The increase in the key rate of the US Federal Reserve and the increased risks of recession affected oil quotes. So, the price of oil fell to $72.3 per barrel this week. However, it had recovered to $75.3 by the end of the week. Most market participants expect an increase in the purchase of crude oil from China due to the increase in domestic traffic in China. An additional growth factor is favourable statistics on the state of the labour market in the United States. The number of jobs created in April increased by 253 thousand, while there were predicted 180 thousand. 

The unemployment rate for the same period decreased from 3.5% to 3.4% (forecast 3.6%), and the average salary increased by 4.4%. In general, investors reacted positively to the statistics, which led to a decline in pessimism in the market. Now investors are waiting for inflation data, which will be released on Wednesday and according to the results of which it will be possible to predict the next decision on the US Federal Reserve rate.

The exchange rate of the Russian currency last week strengthened to 77.4 rubles per dollar. Despite the negative external economic conditions the ruble is strengthening due to a reduction in the discount on Russian oil and an increase in foreign exchange earnings. An important factor is the reduction in demand for the currency. There is a reduction in imports due to the tightening of sanctions restrictions in Russia, which is accompanied by a decrease in demand for foreign currency.

We expect a rate in the range of 447.7-460.72 tenge per dollar in May. At the same time, a significant impact of internal factors will be reflected by the strengthening of the exchange rate, which goes beyond our forecast. For example, conducting a tax week and converting the NBK currency.