Currency market: the ariary again on a bad slope

The foreign currency shortage is on its way. Reserves will be feeding the banking market for only three months. Fresh cash is coming up by the dropper since different financing sources are plugged up because of the crisis. As a result, some exchange offices are adopting somewhat a radical measure, motivated by the wait-and-see policy or by prudence. Not a penny over the amount of 7000 euros is allowed to be sold. 

Although such measure is not illegal, it has backlashes on the currency market. The exhaustion of reserves would be slowed down, though the currency sales restriction looks terrible. On the other hand, it is likely to take a heavy toll on economic operators. The plummeting foreign currency offer is inevitably causing a slump of the national currency. The ariary can cope compared to the dollar but doesn’t make it against the euro. 

Since mid-September, the euro has been turning more and more expensive, coming near the 3000 ariary red line. Although Prime minister Roindefo is currently ruling the free fall out, the national currency’s terrible estate is again reminding that the country is still in crisis. The ariary significantly dropped during the first quarter of the year 2009, because of the political crisis. It stabilized by June, in a period in which economic activities began to resume. 

Several reasons can explain the slump of the national currency against the euro, currently sold for 2 836 Ars. First of all, the tourists turned away from the Big Island, the returns in foreign currency dropped. Then, export activities are so miserable that there is not much to be expected from foreign currency repatriation. Finally, foreign investments are slowing down. 

The fear of foreign currency shortage is stirring speculations up. The demand is more significant than usual whereas the offer is more limited than usual. The financial crisis is to be feared if the economy remains choked by political uneasiness in the country.