Kyat extends its decline on local exchanges
The local currency has been rapidly declining this month, reaching K1220 per US dollar yesterday on unofficial exchanges, according to industry website naungmoon.com.
The kyat has slid about 7 percent over the last 10 days, after starting June at around K1137 in the informal market.
“The value of the US dollar is steadily increasing in kyat terms, day-by-day,” said U Myo Htwe, a director at Farmer Pho Yar Zar money changers.
He said an announcement issued on May 29 by the Central Bank of Myanmar which limited withdrawals of US dollars to $5000, twice a week, may have spooked entrepreneurs. “The value of Myanmar’s kyat has been decreasing more and more since then.”
Money changers said that being unable to access dollar accounts at banks has led to more demand from money changers.
The Central Bank of Myanmar maintains an official exchange rate, which yesterday was K1105, though it was K1095 on June 1. It is technically illegal to trade outside a band of plus or minus 0.8pc of this official rate, though this rule is unevenly enforced.
Recently, many major banks have been officially following the Central Bank’s exchange rate but in reality not selling dollars, while some smaller money changers have tried to get around the rules and use the market rates.
One trader said some customers are becoming desperate, offering large amounts to obtain foreign currency.
“People who need dollars are offering as much as K1280 because they are so rare in the market,” he said. “We do not dare to trade a lot, because the dollar has been appreciating so quickly.”
The depreciating value of the kyat hurts all business, particularly those that are import-dependent.
Prominent entrepreneur U Chit Khine said he needs dollars to import crucial inputs such as fuel, on which he spends $40 million a month.
A sharp decline in kyat against the dollar is likely to be a big headache for local businesses. Even if they are export-oriented, they need to import items like machinery and fuel for production.
U Myo Htwe said many consumers will be forced to buy imported products at higher prices. However, it is also the start of the rainy season, which traditionally marks a slow-down in work, decreasing demand for some items such as fuel.
“The situation would be even worse if it happened in the summer,” he said. U Myo Htwe said gem mining was one area that is particularly slow this time of year.
Translation by Thiri Min Htun
(Quote from Myanmar times online website on 11 June 2015)