The "±2 Tenge" Rule for Exchange Offices Does Not Work Under a Floating Exchange Rate
Translated from Russian with the help of AI. Original: Russian version
Why the rule limiting exchange-office spreads to ±2 tenge, sensible under a strict peg to the US dollar, fails under a floating exchange rate and leaves ordinary customers exposed to hidden rates, currency shortages and cross-rate speculation.
After the devaluation, currency traders and speculators are trying to profit from the exchange rate, or at least avoid losses on it. And because we tend to act first and think later, part of the population simply ends up suffering.
Under the current law on the operation of exchange offices, banks and exchange offices may set a spread of only ±2 tenge, and they may not change the rate on weekends or in the evening. That was expedient and logical when the tenge was strictly pegged to the US dollar. Today, because of volatility, the rule no longer fully works. Here is what it leads to:
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Many people get caught out by online converters, where banks set one rate for online transactions and another for cash. When you carry out the transaction, you do not see the rate; you learn it only after the fact. When you exchange money, you specify the amount of currency you want to buy, but you find out how much was debited in tenge only afterward. This happens because such operations are treated as non-cash payments, to which the two-tenge rule does not apply.
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On weekend evenings, exchange offices simply had no tenge. Even where they did, they posted notices saying they had none. The reason is that, after oil prices rose and the dollar fell against the ruble, it was clear that the tenge would strengthen. That meant they should sell dollars rather than buy them, and the posted rate did not reflect the market. Moreover, because of the time difference with the main international markets, the real picture for the currency becomes clear only late at night. To protect themselves, exchange offices simply refuse to sell either foreign currency or tenge. Ordinary people are the ones who suffer.
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When the rates of the main currencies are fixed, we must remember that there are also cross rates between currencies, which can move against each other. Because of the fixing in tenge, this does not happen, which also gives speculators an opportunity to profit.
I think the National Bank needs to do something about this.
Published in: Facebook, 1 September 2015