Us to Myanmar CurrencyWe to Myanmar Currency
Myanmar's best foreign currency is the US dollar. So, people started putting away their extra money in US currency.
G-markets update: Gold downside, US dollar upside; + BMI expects Myanmar Kyat devaluation
From time to time, a graph appears that indicates a potentially huge displacement of the world' s finance market. There is a risk that the US greenback will see a very sharp rally in the coming month and years, as evidenced by the historical US $1. pull rates (1980-1985 and 1995-2001), which coincided with the fall in the high.
If this is the case, it would be in line with our sustained and prolonged bullishness in US shares, which have recently reached a new high, and our strong position against the US real estate sector and the US dollar. That would also be in line with our long-term assessment that the shares of the industrialised countries will still develop better than the shares of the newly industrialising countries over a period of several years.
Meanwhile, BMI has released its current projections for the Myanmar currency in our on-line services and in our Emerging Markets Monitor monthly mag. Since the beginning of 2013, the rate of decline in the country has been 2.8%, and we see little cause to turn this tendency around in the near-term.
In fact, given the price levels in the major economies of Myanmar (especially Mandalay and Yangon), the currency is still somewhat pricey, and governments and the Federal Reserve have made repeated declarations expressing their preferences for further weakening unity. Therefore, we anticipate that the price of Kyoto at the end of 2013 will be somewhat lower at MMK904/US$ than it is today at MMK880/US$.
Like in other counties that have experienced a fast and abrupt rise in FDI after opening their gates to the world economies (such as Vietnam in the early 2000s and Mongolia in 2007), Myanmar's FDI balance of payments is likely to run into a shortfall in the years ahead, as the import of goods for investments and consumption is expected to rise due to the country's fast pace of expansion.
Although much of this shortfall is funded by foreign direct investment, the net effect on the Kyoto Protocol will still be adverse. We therefore expect the currency to depreciate moderately on average by 2018 at 3.0 % a year. Myanmar would probably experience a significant decline in FDI flows in the case of a major international shocks, while the CA gap would probably continue to be persistent.
Myanmar also continues to face significant policy challenges and a failure by the Myanmar authorities to manage these challenges could be disastrous for the country's incipient overhaul. If you are interested in entering the Myanmar markets but are not sure how the country's policy and business environment interact, you should find our story useful.
You can find further analyses on Myanmar in our Cambodia, Laos and Myanmar Business Forecast Report and in our on-line services. The BMI has a long tradition of tracing and predicting "exotic" currency, i.e. the currency of the fronttier world. Our website gives our readers the opportunity to check currency predictions for such major countries as the Army drama, Guatemalan Qetzal, Haiti ante, Iran, Mozambican Metical, the Ugandan shillings, the Ugandan pesos and other "mainstream" major currency pairs.
As for this week's issue, we maintain the issue of opaque currency. What currency appears to have depreciated against the US currency in the last six month due to a large inflow of expatriate credit?