Myanmar kyat in free fall

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kyat dollarMyanmar’s currency, the kyat , has been hitting consecutive record lows over the past weeks, raising concerns about the stability of the country’s fiscal system.

As noted by Inside Investor on May 13, the monetary framework put in place by the central bank is not strong enough to rein in volatility. Despite putting a floating exchange rate in place set at 818 kyat against the US dollar, with banks allowed to trade at plus or minus 0.8 per cent of the reference rate, the currency crossed 900:1 in mid-May and on May 24 traded around 950:1, with traders expecting to cross 1,000:1 by June.

The depreciation of the currency has three fundamental reasons:

Exports have reached new records, causing a strong inflow of foreign currency which puts pressure on the kyat.

Flash
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A construction boom in Myanmar’s commercial capital is fueling demand for dollars as builders import equipment and materials in large quantities.

People in Myanmar have begun hoarding dollars as they expect a further drop of the kyat in what is seen as the first major bout of currency speculation since Myanmar introduced political and economic reforms in 2011.

Before the Central Bank of Myanmar set a managed float in 2012, the official exchange rate was put at around 6 kyat to the dollar even though the US currency was sold on the black market for over 1,000 kyat, a value where it is obviously heading again.

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Reading Time: 2 minutes

Myanmar’s currency, the kyat , has been hitting consecutive record lows over the past weeks, raising concerns about the stability of the country’s fiscal system.

Reading Time: 2 minutes

kyat dollarMyanmar’s currency, the kyat , has been hitting consecutive record lows over the past weeks, raising concerns about the stability of the country’s fiscal system.

As noted by Inside Investor on May 13, the monetary framework put in place by the central bank is not strong enough to rein in volatility. Despite putting a floating exchange rate in place set at 818 kyat against the US dollar, with banks allowed to trade at plus or minus 0.8 per cent of the reference rate, the currency crossed 900:1 in mid-May and on May 24 traded around 950:1, with traders expecting to cross 1,000:1 by June.

The depreciation of the currency has three fundamental reasons:

Exports have reached new records, causing a strong inflow of foreign currency which puts pressure on the kyat.

Flash
Click to enlarge

A construction boom in Myanmar’s commercial capital is fueling demand for dollars as builders import equipment and materials in large quantities.

People in Myanmar have begun hoarding dollars as they expect a further drop of the kyat in what is seen as the first major bout of currency speculation since Myanmar introduced political and economic reforms in 2011.

Before the Central Bank of Myanmar set a managed float in 2012, the official exchange rate was put at around 6 kyat to the dollar even though the US currency was sold on the black market for over 1,000 kyat, a value where it is obviously heading again.

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