Mauritius Currency Weakening
Posted by Brody on February 26, 2009Exporters on the island nation of Mauritius have begun hoarding dollars in anticipation of a weakening of the Mauritian rupee. The central bank is expected to cut interest rates in order to stimulate the economy. The rupee fell as much as 4.9 percent to close at 34.1570 per dollar. The rupee has declined a total of seven percent already this year.
The Mauritian economy is dependent on tourism for the influx of foreign currency. The exporting of clothing, sugar, and textiles bring in additional foreign currency. With the global economy in a free fall, these cornerstones are no longer reliable. Reservations at luxury Mauritius hotels is falling and recessions in the US, Japan, and Europe are hurting the demand for exports.
The latest figures indicate that the country’s rate of economic expansion will fall from over five percent in 2008 to two percent in 2009. Analysts feel that this downgraded forecast by the International Monetary Fund is a sign that some sort of stimulus package will be needed in this island paradise. And that package will probably include a significant cut in the interest rate.
The Bank of Mauritius has already dropped its rate by one percent (the second time in less than two months). It’s anticipated that the benchmark Mauritian rate will be lowered by 50 basis points when policymakers gather on March 26th.
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