The depreciation that made the Mauritian rupee Africa’s third-worst performing currency in 2015 may be over after the Bank of Mauritius loosened market restrictions to boost liquidity, the central bank governor said.
After weakening for five straight months against the dollar, the Indian Ocean island nation’s rupee gained 1.3 percent this month. The currency “has broadly stabilized against the U.S. dollar, with a slight appreciation noted in the last few days,” said Ramesh Basant Roi, who was appointed to head the Bank of Mauritius on Dec. 30.
“At this current exchange-rate level, the rupee is broadly in line with economic fundamentals,” he said in an e-mailed response to questions on April 21.
The currency of the nation that attracts tourists from Europe with white-sand beaches slumped 12 percent against the dollar this year after an opposition alliance won parliamentary elections in December, which was followed by the firing of central bank Governor Rundheersing Bheenick and the appointment of 68-year-old Roi. The bank sees the economy expanding 4.3 percent in 2015 and with growth in the euro region set for the fastest pace since 2011, tourist arrivals rose 11 percent in the first quarter.
The rupee gained 0.6 percent to 35.80 per dollar by 4:20 p.m. in Port Louis, the capital, on Friday, bringing its advance in the week to 1 percent. In February, the central bank removed measures that had been “hampering the free interplay of market forces” in the rupee exchange rate, Roi said, without giving details.
The bank bought dollars from the market at least four times in February and three in March, according to data on its website that didn’t give reasons for the transactions. Foreign-exchange reserves increased in both months and the rupee weakened. In April, the regulator has so far held off on purchasing dollars.
The 42-member Semdex Index, which is Mauritius’s benchmark stock index, has dropped 6.9 percent this year, the most among 14 sub-Saharan African measures tracked by Bloomberg. The gauge is showing “some signs of stabilization,” said Roi, who was previously governor from 1998 to 2006. Its 14-day relative-strength index fell to 22 on Thursday, the lowest in a month and below the level of 30 that may indicate to some technical traders it’s oversold.
Some stocks “appear to be good value for money,” Roi said, without naming any. “It is expected that market sentiment will recover during the course of the year.”
On April 2, the central bank revoked the license of British American Investment Co.’s Bramer Banking Corp., saying its liquidity situation was “precarious” and capital was “seriously impaired.” A day later, Prime Minister Anerood Jugnauth said there was evidence Bramer was involved in a Ponzi scheme and authorities were investigating an “unprecedented financial scandal.”
Roi said the central bank pulled Bramer’s license because of the liquidity concerns and not because of the Ponzi issue. While the bank is still investigating, “we do not believe that other institutions are implicated in the scheme,” he said. The Financial Services Commission appointed conservators this month for BAI Co., an insurer owned by the same company that controls Bramer.
Coordinated moves between the central bank, the FSC and the government, including the creation of a lender to take over Bramer’s assets, should bolster investor confidence, he said.
“Changes in legislation are under way to vest the bank with wider powers,” Roi said, without giving details. The “removal of the weakest link in the chain, no doubt, makes the chain far stronger and the system far healthier than before,” he said.