Financial market: the Central Bank’s intervention which paid off

How did the ariary recover when nothing else but its fall was expected. The Treasury secretary revealed that his department signed a deal with the central Bank of Madagascar which induced its intervention on the banking currency market. “The aim was the way to improve or at least to support the national currency”. According to Hery Rajaonarimampianina, the return to normal political situation is going to enhance the process. 

The intervention of the central Bank was a “political decision” meant to reassure the market. “We demonstrated that we could intervene “, summed up minister Rajaonarimampianina. He explained that the law of the market applies to the currency market in which money comes in and out. “Demand has not yet dried out”, he argued. The Treasury secretary is, thus, ruling out any run out of currency as well as the lack of offer on the market. 

Minister Rajaonarimampianina blamed the speculators for producing troubles in the banking currency market. The Central Bank has, therefore, shown that it can put an end to the backlashes of speculations. “At each intervention, speculators are in the expectation, they are forced to sell on the market “, explained the Treasury secretary. This flow of currency is the ground for the Ariary’s estate improvement. 

Without a political solution to restore constitutional order, an irretrievable drop of the Ariary was feared. Some pessimistic observers predicted an euro to be bought for 4000 ariary. The situation stabilized in November. The euro’s price has been kept at Ar 2915 since the beginning of the month. The national currency even recovered some points against the dollar. The US dollar has a cost of Ar 1952j on November 10th, against Ar 1972 on November 02. 

Officially, there has been no currency crisis in Madagascar since the day of the governmental putsch. The country has kept a relative financial health thanks to its significant foreign currency reserves fuelled by the large scale mining operations. They allowed the national currency to hold on against the dollar, bought for Ar 1866 by the beginning of January, Ar 1943 on July 01 and Ar 1972 by beginning November. In short words, the ariary has been losing 110 points against the dollar since the beginning of the year. 

The situation is not that good against the euro even though the authorities, Monja Roindefo, the outgoing Prime first, have rather hint the case behind the word “slipping”. The euro shot up from Ar 2606 to Ar 2725, between January and July of this year. The depreciation was accurate in October when the suspension of foreign financings, on the one hand, and the slowdown in foreign investments on the other hand, took their toll. The euro was exchanged against Ar 2905 on October 02, and reached Ar 3003 on October 15.