Devalued kyat blamed on dollar strength

The peak export season in the last four months of a calendar year normally sees the kyat strengthen against the US dollar, though this year the opposite is happening.

Rising imports and a series of international events are being blamed for a weakening kyat, as the current has depreciated to a K988 to K978 gap for buying and selling a US dollar as of September 18, compared with K975 to K969 a week earlier.

U Win Myint, a licensed money changer in Kyauktada township, said a strong US dollar globally and a growing trade gap in Myanmar are to blame for the weaker local currency.

The spread between the buying and selling rates has also been increasing, he said.

A Central Bank of Myanmar currency expert said the local currency is often at the mercy of what happens with the benchmark US dollar.

“We are facing a growing trade deficit, and that’s an important reason our currency is depreciating, but it’s important to check the world currency market – and the US dollar is appreciating compared to other currencies,” he said.

The Central Bank of Myanmar’s reference rate has likewise depreciated to K978 a US dollar on September 18, compared with K970 on September 11.

Traditionally, Myanmar’s exports do well after the rainy season ends, making exporting easier, and also with the important rice harvest in December and January.

But with the rising trade deficit, businesspeople say they must purchase US dollars for imports, driving down the kyat in relation to the world’s main currency.

Fisheries businessperson U Hnin Oo said that with imports nearly double exports so far in 2014-15 due to rising consumer demand and a ban on exporting unprocessed timber, there is increasing demand for the dollar.

An unbalance in imports and exports is happening in many sectors, including fisheries, where exports have declined in the last few years, he said. “However, it won’t be as bad a situation as [the currency fluctuations around] past events.”

While Myanmar only instituted a managed float in April 2012, black market rates before the float had fluctuated widely, trading at a range from K650 to over K1000 since 2009. At the time of the 2012 float, the kyat officially traded at K6.4 per dollar, but in the black market traded at about K800 per dollar, and it has since depreciated about 25 percent.

U Win Nge, an official at Aung Thamardi gold shop, said currency and gold speculators had also seized on the plans by Yangon mayor U Myint Swe to construct a US$15 billion project as impetus for increased demand for the dollar. U Win Nge added that rumours around the project are probably being fanned by dollar speculators.

Local gold prices have also tumbled in line with a drop in international prices. Gold traded for $1230 an ounce on September 18, about a 4pc drop on the $1280 it fetched internationally the week previous, according to industry website

Local gold fell about K10,000 a tical (1 tical is 0.576 ounces or 0.527 troy ounces) during the same period, according to U Win Nge. One tical of gold cost about K655,000 on local markets last week.

Internationally, gold prices traditionally serve as a safe haven in the face of risk, while there is considerable domestic demand for the precious metal for use in jewellery as well as in household savings.


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