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Roundup: Myanmar private banks warned against dollar exchange rate speculations

Xinhua, October 6, 2016 Adjust font size:

The Central Bank of Myanmar (CBM) has warned the local private banks not to make speculations any more in local foreign exchange market, Director General of the CBM U Win Thaw said on Thursday.

The U.S. dollar exchange rate with Myanmar kyat in local market started to increase again in August and 1 U.S. dollar was sold for 1,270 kyats but bought for 1,268 kyats on the official market Thursday.

Meanwhile, the reference rate of the CBM was 1,260 kyats per dollar these days. According to the rules of CBM, local banks and currency exchange counters can play the rate upper and lower 0.8 percent from the CBM's reference rate.

The CBM auctions U.S. dollar to local banks every day in order to support the market. Although the banks are to sell U.S. dollar to individual customers in accordance with the demand, some private banks just buy U.S. dollar against the CBM's rules.

Therefore, the customer has to buy the required dollar from informal market with high rate.

"The CBM won't intervene in the market as it is controlling the local market with the managed float system. Actions will be taken against such private banks as per the CBM law if they are proved to make speculations," U Win Thaw told Xinhua.

Local experts attributed the highest exchange rate to the country's high trade deficit which has continued for nearly six months of the 2016-2017 fiscal year, reaching 1.7 billion U.S. dollars as of Sept. 16.

Moreover, black market foreign exchange transaction also impacted the whole local foreign exchange market. Another factor is that the country's inflation rate remains strong.

Habib Rab, senior country economist of World Bank Myanmar, said the government needs appropriate monetary policy for more flexible inflation and exchange rate to lure foreign direct investment. These pressures also have impact on the daily life of people.

In addition, some experts said the unstable foreign exchange rate may be due to such invisible hands as the country has the potential of huge investment inflow with U.S. dollar capitals. Therefore, they are making speculations for earning for their interests.

The country's foreign exchange rate also hit the highest of 1,300 kyats per dollar in the same period of last 2015-2016 fiscal year due to the lack of U.S. dollar supply in the market. There were also market speculations then. Endit