Aug 23, 2011

US dollar falls to 10-year low in Myanmar

The dollar price fell to a record low of 680 kyat on Monday on the foreign currency exchange market, further hurting Myanmar’s export industry.

Currency dealers said the dollar fell below the 700 kyat level for the first time from around 750 kyat while the new government is preparing to establish a new currency exchange rate. In 2001, the dollar fell to around 900 kyat.

“Despite the falling price, most of the customers are selling their dollars,” said a foreign exchange dealer in Tamwe Township in Rangoon.

Economist Khin Maung Nyo said it was impossible to know when the dollar’s fall will stop.

“I assume that the fundamentals [of the market] have been changed. The current fluctuations are not due to speculations made by traders,” said Khin Maung Nyo.

The dollar’s fall started at the end of 2009 and reached 750 kyat in June 2011, which hurt Myanmar’s export industries, the travel and tour industry and people working in foreign countries and domestic workers who earn salaries in foreign exchange certificates (FEC).

President Thein Sein told businessmen at a meeting last Wednesday that the falling dollar had impacted the Myanmar economy.

To alleviate the impact on the export industry and to encourage employment, the export tax was eliminated and the profit tax was reduced to 2 per cent on August 18.

The income tax on Myanmar citizens at home and abroad has been reduced to 2 percent from 10 per cent starting from August 19 for six months, according to the new regulations.

In spite of the changes, the export industry is still suffering from the falling dollar price, said Garment Industry Association chairman Myint Soe.

“Our factories have job orders but we don’t have enough money to pay wages to our workers. We have to continue our losing business, and we cannot stop our manufacturing,” Myint Soe said. The FEC, which is pegged to the US dollar, fell to 620 kyat per unit.

Economist Khin Maung Nyo said that the falling dollar price is related to the rising global gold price.

“In the global market, the dollar will fall when the gold price rises. So this factor is related to the current falling dollar price to some extent,” said Khin Maung Nyo.

The price of Myanmar gold cannot rise too high despite the global price rise because the dollar price is falling in the Myanmar market, said gold shop dealers.

Citing recent fluctuations, dealers said the global gold price was 1,850 US dollars per troy ounce (1.76 tical) on Sunday and then rose in the Myanmar market to more than 700,000 kyat per tical on that day.

But on Monday, the gold price in the Myanmar market for 24 carat gold fell to 688,000 kyat per tical even though the gold price on the world market rose to 1,870 US dollars because of the continuous falling dollar price in Myanmar.

Presidential advisor Dr. Myint read a paper titled “The Burmese foreign exchange rate” at a three-day national-level economic development workshop that concluded on Sunday. The current official exchange rate is about 6 kyat per US dollar.

Economists and experts from the IMF will come to Myanmar in October to offer technical assistance to the government on foreign exchange rate reform.

Source: Mizzima