USD/KZT: Upside risks in the near term
KZT has been moving with oil prices in the last couple of months, showing depreciation to 454 by the end of June (we expected 455) and recovering to 440-45 in early July.
The trade balance is the key driver of FX as capital flows seem to be muted: transfers from NFRK, the sovereign fund, to the budget halved month-on-month to $0.6bn in June, while portfolio flows were likely balanced, as the National Bank of Kazakhstan guided to gradual cuts in the key rate starting in September amid the slowdown in CPI.
We continue to see gradual KZT depreciation on limited oil output and capital outflow risks as our base case, while acknowledging near-term upside risks coming from expectations of better global risk appetite and oil prices.
