The Central Bank of Myanmar has rapidly increased its rate for US dollar-kyat conversion over the last week, nearly catching up with the market rate.
The Central Bank had left its official rate at K1027 per US dollar since February, though the rate charged by most money lenders and increasingly by commercial banks had climbed to as high as K1090.
The spread between the official rate and the market rate created the potential for arbitrage, and caused difficulty for consumers, with some people aiming to change money telling The Myanmar Times they have been turned away from banks or offered non-market rates.
The Central Bank’s reference rate for the kyat against the dollar is based on auctions it conducts and authorised domestic dealer banks, according to its website.
Local banks have few options to obtain foreign currency, often relying on the Central Bank’s daily auctions.
Yesterday the Central Bank increased the reference rate to K1065, within 1.5 percent of the market rate of about K1080. When the reference rate was at K1027, the spread had been as high as 5pc.
The Central Bank of Myanmar had been selling US dollars at a low price recently, but now the rates are rising, said U Mya Than, chair of Myanmar Oriental Bank.
“The CBM’s price to buy dollars is now not that much different from the other banks,” he said.
“If the Central Bank sells large amounts of dollars, the price at the other banks will drop. Now the Central Bank is selling large amounts of dollars … The price will fall.”
U Mya Than also said the dollar’s strength against the kyat was not necessarily a reflection of the kyat’s weakness, but rather that the currency of most countries around the world is weakening relative to the greenback.
While banks often depend on the Central Bank for their dollars, money changers say they turn to other sources.
An official with PHK money changers in Pabedan township said its operations do not involve banks. Rather, the firm simply buys and sells dollars from customers.
“If I don’t have any dollars to sell, I don’t sell,” he said. “But there are always buyers and sellers operating.”
He added that it can be expensive to buy and sell through the banks, meaning he usually steers clear.
Daw May Oo Khaing, managing director of Ocean Crown Service, said most exchange businesses do not rely on the Central Bank or the private banks, but generally turn to state-owned Myanmar Investment and Commercial Bank for exchange.
“That bank makes it very easy to exchange money and transfer it overseas. Some of the private banks have so many complaints for old and crumpled dollar notes, and they also ask us too much about the source of the dollars,” she said. “They make it so busy for us; that’s why we don’t go there.”
Exporters have also generally welcomed the weakening kyat, while importers face problems from more expensive products, she said.
Differences in rates from one firm to another also make transactions different. Daw May Oo Khaing also said that the country is not yet in a position to fight the world’s dollar market, so whether the exchange rate is higher or lower, it has not had a large effect on exports and imports.
Businesspeople say they would like to see more stability in exchange.
Daw Toe Nandar Tin, managing director of Fishery CMP Company, said it would like the exchange rate to stabilise around K1000 to a dollar. When the kyat depreciates, raw material inputs become more expensive.
While the difference between the exchange rate at the Central Bank and the rate at other banks is not a concern, businesses want more stability – and cheaper imports.
“When the exchange rate is $1 to more than K1100, it is not comfortable for us,” she said.
Source: Myanmar Times