By Sujata Rao
LONDON, Feb 11 (Reuters) - Kazakhstan's hefty devaluation could see other ex-Soviet states follow suit to protect their trade against fallout from a slide in the rouble as Moscow moves to float its currency.
The rouble has lost 6 percent against the dollar this year and many analysts see that as the key factor that prompted Kazakhstan, which buys nearly 40 percent of its imports from Russia, to seize the initiative and devalue its tenge on Tuesday by 19 percent against the dollar.
It may also push Belarus and Ukraine into devaluations of their own - potentially a beggar-thy-neighbour cycle that risks disrupting trade balances across the region.
"In all these countries, authorities are looking at the rouble in their rear-view mirror," said Christopher Granville, managing director at consultancy Trusted Sources in London.
"The rouble is the anchor currency for the wider trading area so you are seeing other countries responding to Russia allowing a sharp rouble move."
Kazakhstan attributed its move to global volatility caused by the U.S. Federal Reserve scaling back its policy of printing money through buying financial assets. But analysts saw the explanation rather in an effective depreciation of the rouble against the tenge by some 10 percent over the past year.
"The devaluation versus the dollar clearly targets the rouble-tenge cross," said ING Bank's Dmitry Polevoy, who added in a note to clients that calculations on a balance of payments basis put fair value for the tenge roughly 10 percent stronger than the 185 per dollar which is now the central bank target.
"So the National Bank of Kazakhstan wins a more beneficial position for the tenge," Polevoy said. "The only question is whether Russia will follow suit."
RUSSIA DOMINANT
Tuesday's Kazakh move comes exactly five years after an 18-percent tenge devaluation.
Back then, plunging oil prices had undermined the rouble. This time, too, the process began in Moscow, which last month scrapped targeted rouble interventions, indicating a shift to a fully floating currency was on track for 2015.
Along with the broader flight from emerging markets, that sent the rouble to record lows against a dollar-euro basket.
For Moscow's customs union partners, Belarus and Kazakhstan, the shift is particularly bad news because their local producers can no longer use tariff barriers against cheap imports from their giant neighbour.
Russian exports to Kazakhstan for instance have risen sharply in the past year, trade data show, with 38 percent of Kazakhstan's imports now coming from its northern neighbour.