Mauritius finmin says to buy $100 mln in fx to weaken rupee

PORT LOUIS (Reuters) - Mauritius' finance ministry has said it will buy $100 million in foreign currency to try to contain the appreciation of the rupee, which has hurt economic growth.

The daily Le Mauricien newspaper cited banking sources on Friday as saying the Accountant General had this week written to local banks to inform them of the decision.

Rundheersingh Bheenick, the governor of Bank of Mauritius, confirmed the decision to Reuters late on Friday.

Finance Minister Xavier Duval said earlier this week that an overly strong rupee had lopped a percentage point off the Indian Ocean island's economic growth this year.

The rupee hit a six-year high of 35.37 per euro in May, Thomson Reuters data showed, hurting exporters and tourism operators, who were already reeling from the slowdown in the euro zone.

Analysts, who say the rupee has been overvalued by 10-15 percent in 2012, criticised the exceptional decision, arguing it would exacerbate tensions between the finance ministry and the central bank.

"There is a tension between the finance minister and the central bank governor as the former is under pressure with the growth rate going down. But this is a wrong move by the ministry as it would impact on the credibility of local institutions and the monetary policy," said Chandan Jankee, an economics professor at the University of Mauritius.

Jankee said the monetary policy committee should have cut the key repo rate at its last meeting in September instead of holding it at 4.90 percent.

However, Bheenick said he was satisfied with the central bank's monetary policy stance.

"It is normal to have a difference of opinion. This is the case everywhere," Bheenick told Reuters on the sidelines of a banking ceremony.

Officials have cut their economic growth forecast for this year for the $10-billion-economy to 3.2 percent from an initial 3.5 percent.

In June, Bank of Mauritius said it was offering a credit line of 600 million euros to remove exchange rate risks from the balance sheets of export companies and to help them refinance debt where charges had become unbearable.

Source: http://news.yahoo.com/mauritius-finmin-says-buy-100-mln-fx-weaken-082905006--business.html

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