Monday, September 25, 2017

Kyat depreciates past barrier of K1000 per USD

The kyat depreciated in value past the psychological barrier of K1000 against the US dollar last week, though experts downplayed concern it will significantly affect the economy.

The Central Bank of Myanmar’s reference rate stood at K1006 per dollar on October 31, capping a week of declines against major international currencies, also including the euro and yen.

Values of about K1000 per dollar are near the highest the kyat has traded at since April 2012, when the Central Bank implemented a managed floating exchange rate in the place of an official but unrealistic exchange rate of K6 per dollar. The kyat then almost immediately moved to K800 per dollar.

The kyat has been depreciating from rates around K990 recorded in mid-October, and about K970 a dollar in mid-September.

“There are a number of reasons the exchange rate fluctuates, and speculation also has a big impact,” said a Central Bank director, who requested not to be named.

The Central Bank sells daily lots of dollars and purchases kyats, partly in an attempt to restore value in the local currency. However, the Myanmar kyat has also declined against regional currencies like the Thai baht, Singapore dollar and Chinese yuan.

The kyat generally follows seasonal fluctuations, with demand for the local currency being highest during harvests and other periods of high exports. With the rice harvest not set to begin in most of the country until December, demand for the kyat has wavered in recent weeks.

Downtown money changers say business is brisk, as customers try to switch to the US dollar now to avoid further depreciation.

U Naing Gyi, a 50-year-old money changer on Bo Aung Kyaw Road, said his phone line is constantly ringing with customer requests.

He added the US dollar and gold are the two more important exchange rates in Myanmar, with other currencies also based on these two rates.

“I cannot supply customers as much as I would like to right now,” he said. “Strong demand means it’s unlikely the rate will decline easily.”

Ministry of Commerce economic advisor U Maung Aung said the decline in the kyat’s value has not yet been large enough to cause problems.

Though imports have outpaced exports by about $3.1 billion over the last seven months, U Maung Aung claimed the expanding trade deficit is likely not the main reason for its decline, as much of the imports are being used to generate economic activity inside Myanmar.

Most imports are paid for with US dollars, adding value to the greenback against the kyat.

Kyats required to buy a US dollarKyats required to buy a US dollar