Dollar hits record high against depreciating kyat

The dollar to kyat reference exchange rate, which is fixed by the Central Bank of Myanmar (CBM), hit a record high of K1,429 on August 2. At private banks and money changers, the exchange rate was as high as K1,445.

On the face of it, the depreciating value of the kyat bodes well for exporters, as goods sold will now be cheaper for overseas buyers. Yet, local traders say this isn’t the case.

This is because the cost of importing commodities and raw materials involved in the manufacturing process would offset the higher export demand.

U Win Thaw, director general of the CBM Governor’s Office, said the value of the kyat depends on the US dollar, and that the Central Bank does not have much control over the direction of the US currency.

However, the strength of the kyat is also influenced by the level of exports and foreign direct investments (FDI) into the country, which draws an additional supply of US dollars into the economy.

«If export earnings and FDI are high, the exchange rate will be more stable due to sufficient supply of dollars in the market,” he said.

Currently, the situation is such that exports are low and FDI is stagnant, which has led to higher demand for the dollar and caused the kyat to depreciate against the US currency.

“To avoid volatility in the exchange rate, the CBM has been actively controlling its reference exchange rate on a daily basis,” said U Win Thaw.

According to data from the Ministry of Commerce, trade between April 1 and July 20 included imports worth US$6 billion and exports of up to $4.8 billion, resulting in a trade deficit of more than $1 billion.

Source: Myanmar Times

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