No end in sight for kyat weakness against dollar: analyst

Photo of a money changer counter in Yangon. The kyat continues weakening against the dollar amid growing demand for the U.S. currency.  Photo:  Ye Myint
Photo of a money changer counter in Yangon. The kyat continues weakening against the dollar amid growing demand for the U.S. currency.
Photo: Ye Myint

Yangon, 15 July — The U.S. dollar is likely to continue strengthening against the kyat due to persistent demand for the greenback in Myanmar, where it is the currency of choice for importers and exporters, market watchers said Wednesday.
The dollar may strengthen against the kyat until the end of the year, economic analyst U Saw Naing (Applied Economics) told The Global New Light of Myanmar.
Strong demand for the dollar — which, along with gold, is much preferred to the kyat among investors — has caused a shortage of the U.S. currency in the market, which has further fuelled demand, he added.
Static foreign direct investment, declining exports and weakening income from oil and gas sales have also contributed to the dollar’s strength, he said.
Dr Soe Tun, vice-chairman of the Myanmar Rice Federation, said low export volume in the current rainy season and limited inflows of foreign capital in the run-up to the general elections will most likely contribute to a continued rise in the value of the dollar.
The Central Bank of Myanmar set its reference foreign exchange rate at K1,210 to the dollar on Wednesday, up from K1205 on Tuesday and K1200 on Monday.
The incremental increases came after the CBM moved the rate to K1200 on 13 July, up from K1125 on 10 July, marking a high since the adoption of a managed float exchange rate system.
IMF Mission Chief for Myanmar Mr. Yongzheng Yang welcomed the central bank’s adjustment, saying it should help balance the exchange market by attracting more foreign currency.
IMF Resident Representative in Myanmar Ms. Yu Ching Wong said the international lender supported moves by the CBM to tighten monetary policy by scaling up deposit auctions.
“We welcome this development, which will help reduce credit growth, lower inflation pressure, and anchor exchange rate expectations,” she said.
Despite the CBM setting the exchange rate at K1210 on Wednesday, the selling rate was as high as 1,240 a dollar, according to a money changer in Yangon. Exchange counters at domestic banks had halted selling, with the buying rate set at K1215.
The country’s low export volume and heavy reliance on imports, which triggered a $5 billion trade deficit last fiscal year, contributed to the growing demand for dollars in the local market, according to senior official Myanmar Fishery Federation U Hnin Oo.
“The demand for dollars is being driven by imports of goods for domestic consumption,” said the official, adding that the small and medium enterprise sector needed to boost production.
The dollar appreciation will continue as the country cannot lower its imports and raise its production to increase foreign currency incomes, he added. — GNLM

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