The Myanmar kyat has strengthened against the US dollar in recent months, with the exchange rate hovering just above K1500 over the past two weeks. While volatility has risen, experts reckon the Central Bank has done a good job in keeping the kyat stable. That’s culled demand for the greenback locally, leading to the appreciation of the kyat.

Investors are limiting their investments in the manufacturing sector because there is a lack of demand. As a result, the use of foreign currency in the local economy has declined, leading to a stronger kyat. The Central Bank of Myanmar has been purchasing dollars to stabilize the exchange rate since October.The CBM’s moves to purchase foreign currency is to prevent sharp drops or spikes in the exchange rates so businesses can running smoothly in Myanmar.The exchange rate movements in Myanmar this year have broadly been associated with vulnerabilities in the balance of payments, sticky high inflation in Myanmar, and the overall movement of the US dollar in the global market.

Nevertheless, the authorities have been more flexible in managing the exchange rate,they said, adding that as Myanmar’s international reserves are relatively low compared to regional peers, the CBM should “continue building up its foreign reserves by opportunistically intervening in the foreign exchange market.” At current levels, the exchange rate could also help make imports more affordable and the trade deficit – now US$1.13 billion – narrow further. Illegal trading is overwhelming and it is difficult to control the flow of currency in the informal economy, which is bad for business in the formal economy.

Source: Myanmar Times