Kazakhstan’s national currency entered 2026 on unexpectedly strong footing. In December 2025, the tenge appreciated by 1.3 percent, strengthening to 505.73 per US dollar. Over the full year, the tenge gained 3.7 percent, rising from 525.10 to 505.73 per dollar, DKNews.kz reports.
At first glance, this looks like a rare piece of good news for the currency market. But beneath the surface, the dynamics are far more complex - and far less reassuring. This is highlighted in a recent FX market commentary by Saltanat Igenbekova, analyst at Halyk Finance, based on December data published by the National Bank of Kazakhstan.
Why the tenge strengthened in December
According to the National Bank, total foreign exchange trading volume on the Kazakhstan Stock Exchange jumped to USD 7.9 billion in December, well above November’s USD 5.6 billion.
What makes this unusual is that the main official sources of FX supply actually declined by USD 651 million month-on-month. Sales of foreign currency from the National Fund fell to USD 400 million, the lowest level of 2025, down from USD 600 million in November. FX inflows from the quasi-government sector, non-resident investors in government securities, and mirror operations related to gold purchases also decreased.
Under normal circumstances, such a contraction in supply would have put pressure on the tenge. Instead, the currency strengthened and market turnover surged. This suggests the presence of a significant alternative source of foreign currency, not directly visible in the official breakdown.
Analysts believe this excess supply most likely came from the conversion of foreign borrowings raised by the government and quasi-government sector in the fourth quarter of 2025.
Gold purchases and mirror operations at record levels
In December, the National Bank continued purchasing gold on the domestic market to sterilise excess tenge liquidity. Gold purchases reached KZT 475 billion, or approximately USD 929 million, the highest monthly figure of 2025.
Over the fourth quarter, the regulator sold foreign currency equivalent to KZT 1.4 trillion, and for the full year, FX sales under the mirror mechanism totalled USD 7 billion.
At the same time, FX purchases for the Unified Accumulative Pension Fund have been suspended since August 2025, and no direct FX interventions were carried out in December.
Non-residents: the carry trade effect is fading
The role of foreign investors deserves special attention. From October 2025 onward, carry trade strategies became increasingly attractive due to a sharp hike in the base rate and large FX sales by the National Bank under the mirror mechanism.
In November, this triggered a strong inflow of foreign capital: non-resident holdings of Kazakhstan’s government securities increased by KZT 341 billion (around USD 652 million). This inflow, combined with FX sales by the National Bank, was one of the key drivers behind the tenge’s November appreciation.
However, the picture changed in December. Capital inflows slowed sharply, with non-resident investments rising by just KZT 131 billion (approximately USD 256 million). This cooling of foreign investor interest increases the risk of volatility in the FX market.
As analysts point out, non-resident investments in government securities are inherently volatile and partly speculative. In the event of an external or domestic shock, a rapid outflow of foreign capital could sharply increase demand for foreign currency and put strong pressure on the tenge.
January and 2026: pressure on the currency is building
Looking ahead, the outlook for early 2026 appears less favourable. In January, FX sales from the National Fund are planned at USD 350-450 million.
At the same time, total transfers from the National Fund to the state budget in 2026 will be almost halved, falling from KZT 5.25 trillion in 2025 to KZT 2.77 trillion.
This implies that average monthly FX sales will decline from USD 683 million in 2025 to roughly USD 370-387 million in 2026, significantly reducing support for the tenge.
Additional uncertainty stems from the lack of transparency around potential FX conversions from the National Fund to finance bond purchases by the quasi-government sector. Such transactions are often abrupt and not announced in advance, making exchange rate dynamics harder to predict.
What lies ahead for the tenge
Mirror operations will continue in the first quarter of 2026, but the volume of FX sales will be around 23 percent lower than in the fourth quarter of 2025. This further weakens the currency’s support mechanisms.
At a fundamental level, the tenge remains under pressure from external trade imbalances: export-related FX inflows are growing too slowly, while demand for imports remains persistently high. As a result, the trade surplus is narrowing. Meanwhile, foreign investor activity in the government securities market continues to cool.
The spike in FX supply observed in December from non-transparent sources is widely seen as a one-off, short-lived factor rather than a sustainable trend.
Bottom line
A combination of factors - reduced FX sales from the National Fund, lower mirror operation volumes, declining non-resident investment activity, and a weakening external trade balance - is creating persistent downward pressure on the tenge.
The base-case scenario points to a gradual depreciation of the national currency in the coming months. At the same time, a sharp exit of foreign investors from Kazakhstan’s government securities remains a key risk that could significantly accelerate devaluation pressures.
