Central Bank revises currency basket for the Rupee |11 October 2006

By doing so, it aligns the Rupee more closely to the Euro, Pound Sterling and US Dollar, thus relating it better to the principal sources of foreign exchange into the country, principally through tourism and trade, a communiqué from the Central Bank says.

Since May 1996, the Seychelles exchange rate regime was based on a basket peg, the Seychelles Trade and Tourism Weighted Basket (STTWB), which comprised six currencies, notably the Euro (37.7%), US dollar (25.7%), Pound sterling (15.7%), South African Rand (10.5%), Singapore dollar (7.7%) and Japanese Yen (2.7%).

In an exercise to examine the movements in the two underlying indicators of the country’s exchange rate regime, namely tourism and trade, it was observed that the currencies that influence exchanges between the domestic economy and the rest of the world are Euro, Pound sterling and US dollar.

Consequently the basket has been revised to reflect these three main currencies with their new respective weights as follows: Euro (59.1%), Pound sterling (30.2%), and US dollar (10.7%). Among the three currencies, the strong bias of the Euro shows the increased share of European tourism to Seychelles and also the substantial proportion of the country’s exports being channelled to key European markets, remarks the communiqué.

To put the economy’s exchange rate regime in line with these developments, the Central Bank has decided to incorporate these changes so that the potential of the country’s tourism and trade can be maximized overtime, explains the communiqué.

With the revision of the basket, the appreciation limit of US $1 = R5.50 which was introduced on July 1, 2003 has been removed so that the Rupee will fluctuate with development on the international market of foreign currencies, the communiqué says.

According to a spokesperson for the Central Bank, the revised basket reflects better the realities of the Seychelles economy.