In the year 1878, following massive inflow of Indian rupees (INR) to Mauritius (because of mass Indian
immigration), the country entered into a Common Monetary Union with India (the INR being the legal
tender). In 1934, Mauritius introduced its own currency, the Mauritian rupee but it was pegged to the
British pound (GBP) until 1972. The year 1974 is remembered for the sugar boom event following large
sugar production and high sugar prices in the world market. This was accompanied by a high rate of
money supply expansion and significant increases in wages and salaries. The government had to use
price controls to contain inflation. Increasing oil prices in the late 1970s coupled with adverse weather
conditions damaging food crops deteriorated the economic situation of Mauritius. In the same period,
the island adopted its first Structural Adjustment Programme and the rupee was devalued by 22.9 %
in October 1979. The direct impact of the devaluation was seen on import prices which sky rocketed.
Consequently, in October 1980, Mauritius witnessed an inflation rate of 42 % - the highest ever recorded
since its independence. The higher inflation rate in Mauritius compared to its other trading partners
took a toll on the economy; the nominal exchange rate took a continuously depreciating trend against
the US dollar.
Exchange rate restrictions were removed in the early nineties and by 1994 the rupee was under the
managed float. Since the beginning of year 2000, the US dollar has been appreciating against the
Mauritian rupee remaining above Rs 25 as a major part of imports are invoiced in dollars (above 65% of
imports are denominated in dollar). In the wake of global financial downturn, Mauritius has witnessed
a lethargic economic growth. The GDP growth slacked from 5.1% in 2008 to 3.1% in 2009; but rose
to 4.2% in 2010. During 2010, the Mauritian rupee on an average strengthened against the US dollar
by 4.97%, the rupee appreciated by around 2% against the euro on an average following the troubles
endured by the latter currency on foreign exchange markets as a result of the challenges besetting the
euro zone economy. Rupee appreciated the most against the pound sterling with an increase of 7.12%
over the same period. This trend has been followed during the first three months of 2011.
This year, the USD/MUR pair has been very volatile on concerns over the US economic recovery and
uncertainty prevailing in European Union. Rising volatility will make both short term and long term
planning difficult as well as reduce the country’s export competitiveness. The Global Board of Trade
Limited is the first exchange to introduce a Mauritian Rupee futures contract, which was launched for
trading on the Exchange platform from 18th October, 2010. This contract would enable the market
participants to mitigate their currency risk.
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