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Categorized | Currencies

Myanmar’s kyat pulls back from record low against dollar

Posted on November 25, 2016

With attention focused on the yen, ringgit and peso, Myanmar’s currency quietly hit a point of record weakness on Friday, little more than a year out from the historic elections that restored civilian governance.

The kyat weakened 0.1 per cent in morning trade on Friday to a record 1,3150.50 against the dollar before strengthening by as much as 0.9 per cent in afternoon trade. It has since softened again to be flat with the previous day’s close.

Continued weakening in recent months has taken the kyat back to where it at the start of 2016, before a run of strengthening that took it as strong as 1157.55 against the greenback in May.

Myanmar’s currency has charted a volatile trajectory since its central bank moved the currency from a fixed official exchange rate of 6.4 kyat to the dollar to a managed float on April 2 2012, devaluing the currency by more than 12,600 per cent overnight to be 818 kyat against the greenback.

The central bank continues to publish daily reference rates for major currencies to influence trading, and set Friday’s dollar rate at 1,305 kyat.

This year inflationary pressures have risen alongside intensifying pain for Myanmar’s manufacturers, which have suffered along with factories throughout Southeast Asia in the face of flagging global demand. Myanmar’s manufacturing sector spent the five months through October in contraction, according to the latest reading from the Nikkei-Markit purchasing managers’ index.

The kyat has been weakening gradually to its current level since August, when the PMI showed contraction at its worst. During that period intraday trading also saw it drop, briefly, all the way to 675 on September 15 after President Barack Obama vowed to lift all remaining US sanctions on Myanmar.

A recent escalation of the conflict in Muslim areas of western Myanmar has also added to domestic and international pressures. A violent clampdown in the Rakhine state this month left scores dead and focused attention on the state’s muslim minority Rohingya people, who have faced relentless domestic persecution from Buddhist nationalists.

Western powers who backed the nation’s de facto leader Aung San Suu Kyi in her efforts to overturn military rule have expressed growing concern over the situation in Rakhine. But she has said little about the conflict and has only limited ability to rein in the country’s still-powerful military.