Kazakhstan’s currency lost a quarter of its value overnight

Kazakhstan's tenge plunged as much as 23% to an all-time low after the country introduced a free-floating rate.

Women during a protest against the trade ban of lace underwear in Almaty, Kazakhstan on Sunday 16, February 2014. The protest took place after the devaluation of the Kazakh currency. It plunged by 19%, causing fears of a spike in inflation and a dip in li (AP Photo/Vladimir Tretyakov)

The Kazakh currency lost more than a quarter of its value today after the central bank of Kazakhstan let the tenge float freely as the latest move in an escalating currency war.

The tenge plunged as much as 23% to an all-time low of 256.98 per dollar after the Central Asian republic devalued its currency, abandoning control of its exchange rate to allow the market to set the price.

The country is heavily dependent on oil, which has fallen about 30% in the past few weeks, and the move by the national bank follows last week’s devaluation of China’s yuan and yesterday’s decision by Vietnam to adjust the value of its dong.

Prime Minister Karim Massimov said that Kazakhstan would now compete better, "including on the markets of our neighbours," referring to Russia and China, whose yuan move last week sent shockwaves through emerging markets.

The Chinese yuan has fallen by 3% of its value in the past few days, while the Russian rouble has nearly halved in value against the dollar since a year ago.

Although the float was welcomed by Kazakh oil and mining sector firms, analysts warned it might prompt similar action by others in the region, and it dismayed ordinary Kazakhstanis, who have already seen the tenge devalued three times since 1999.

Last year, when the currency plunged by 19% causing fear of spike in inflation, a group of demonstrators – the “panties protestors” - brandishing lacy underwear took to the streets infuriated by a rule regulating synthetic underwear under a new customs union between Kazakhstan, Russia and Belarus and the absurdity of the country’s system.

Kazakh President Nursultan Nazarbayev today ordered police to crack down on any potential ‘provocateurs’ intending to stage protests over the currency reform.