1. Exchange Rate Trends: Recent Developments vs. Last Year
1.1 Recent Trends: November 2024 – March 2025
Over the last 100 days leading up to March 1, 2025, the Mauritian Rupee (MUR) has exhibited relative stability against the US Dollar (USD). The exchange rate fluctuated between a high of 0.022 USD per MUR on February 24, 2025, and a low of 0.021 USD per MUR on February 28, 2025. The average exchange rate over this period was 0.0215 USD per MUR, suggesting a period of relative stability in the currency’s valuation. While there were short-term fluctuations, the Mauritian Rupee maintained a low volatility range. This suggests a certain level of central bank intervention or improved economic fundamentals supporting the rupee’s value. The most significant dip in the period occurred in late February, potentially influenced by external market shocks or investor sentiment shifts.
1.2 Historical Comparison: November 2023 – March 2024
In contrast, during the same 100-day period last year, the exchange rate experienced a higher level of volatility. The Mauritian Rupee fluctuated between 0.0219 USD per MUR on November 25, 2023, and 0.0210 USD per MUR on January 4, 2024. The fluctuation range was approximately 0.0009 USD, slightly narrower than the recent period. The greater fluctuations observed last year can be attributed to external economic shocks, including the continued tightening of US monetary policy and higher inflationary pressures in Mauritius, leading to a depreciation of the rupee.
2. Technical Analysis of the Exchange Rate
A deeper analysis of the exchange rate behavior involves examining moving averages, support and resistance levels, and relative strength indicators.
2.1 Moving Averages
A 50-day moving average of the exchange rate indicates a gradual strengthening of the MUR against the USD since mid-January 2025. This suggests increased confidence in the Mauritian economy or declining demand for USD in domestic markets. However, the 200-day moving average shows a long-term weakening trend. This signals that despite recent stability, the rupee remains under long-term depreciation pressure.
2.2 Support and Resistance Levels
- Support Level: 0.0210 USD per MUR (historically a key floor price).
- Resistance Level: 0.0222 USD per MUR (a ceiling reached in late February 2025).
If the rupee falls below 0.0210, it could signal renewed depreciation pressure. Conversely, a break above 0.0222 would indicate strengthening market confidence in MUR.
2.3 Volatility and RSI Analysis
A Relative Strength Index (RSI) analysis shows the MUR was slightly overbought in mid-February 2025, leading to a temporary pullback at the end of the month. This suggests short-term speculative movements rather than a fundamental change in economic conditions.
3. Macro Factors Driving the Exchange Rate
Exchange rate movements are influenced by both domestic and international macroeconomic forces. The recent stability in the MUR/USD exchange rate is largely attributed to a combination of central bank policies, economic growth in Mauritius, inflationary trends, and global economic conditions.
3.1 Monetary Policy of the Bank of Mauritius
The Bank of Mauritius (BoM) has played a crucial role in stabilizing the exchange rate by maintaining an interest rate of 4.50% as of February 4, 2025. By keeping interest rates relatively stable, BoM has balanced the need to combat inflation while preventing excessive currency depreciation. Foreign exchange reserves have also remained relatively stable at USD 8.2 billion, allowing the central bank to intervene in forex markets when necessary.
3.2 Inflation Trends and Purchasing Power
Mauritius has faced moderate inflation, with the Consumer Price Index (CPI) rising by 5.2% year-on-year. This is lower than the previous year’s inflation rate of 7.4%, contributing to greater exchange rate stability. Lower inflation reduces downward pressure on the MUR, ensuring it retains relative purchasing power against the USD. In comparison, the United States has seen inflation moderate to 3.1%, leading to a more predictable exchange rate trajectory.
3.3 Trade Balance and Current Account Deficit
Mauritius runs a structural trade deficit, importing more goods than it exports. The country relies heavily on tourism, financial services, and textile exports. Recent data shows:
- Exports rose by 3.8% in Q4 2024, driven by demand for textiles and sugar.
- Imports increased by 2.9%, largely due to higher oil and food costs.
Despite an improved current account deficit (from -7.1% of GDP in 2023 to -6.5% in 2024), Mauritius remains dependent on USD-denominated imports, influencing forex demand.
3.4 Global Economic Conditions
The US Federal Reserve’s monetary policy has had a significant impact on global currencies. With US interest rates stabilizing around 5.25%, the USD has remained strong, limiting potential MUR appreciation. Additionally, global oil price fluctuations (trading around $85 per barrel in February 2025) have increased Mauritius’s import costs, further affecting currency dynamics.
4. Long-Term Macroeconomic Consequences for Mauritius
Exchange rate stability has direct and indirect implications for Mauritius’s trade, investment climate, tourism sector, and economic development.
4.1 Impact on Trade and Investment
A relatively stable MUR to USD exchange rate enhances investor confidence, encouraging foreign direct investment (FDI). If Mauritius maintains exchange rate stability, sectors such as real estate, financial services, and offshore banking will benefit. However, any sustained depreciation of the rupee could lead to higher import costs, impacting businesses reliant on foreign goods and services.
4.2 Effect on the Tourism Industry
Tourism is a major foreign exchange earner for Mauritius. A weaker MUR makes the country a more attractive travel destination by reducing costs for international visitors. However, excessive currency depreciation could increase operational costs for hotels and tourism services due to higher import prices.
4.3 Inflationary Risks and Economic Growth
While inflation has declined, continued depreciation pressure on the rupee could reintroduce inflationary risks. A weaker currency raises import prices, increasing costs for food, fuel, and consumer goods. If inflation exceeds 6%, consumer purchasing power would erode, negatively affecting domestic consumption and economic growth. The government must carefully balance monetary policy and fiscal discipline to maintain stability.
4.4 Implications for the Financial Sector
Mauritius aims to position itself as a regional financial hub between Africa, Europe, and Asia. Exchange rate volatility can impact the country’s competitiveness in offshore banking and financial services. A stable MUR/USD rate attracts international firms looking for predictability in forex transactions, reinforcing Mauritius’s role as an investment destination.
5. Future Outlook and Risk Factors
Looking ahead, the exchange rate trajectory will depend on several risk factors:
- US Federal Reserve Policy Changes: Any unexpected interest rate hikes in the US could strengthen the dollar, putting depreciation pressure on the MUR.
- Geopolitical Events: Ongoing global uncertainties, including supply chain disruptions and Middle Eastern tensions, could impact forex markets.
- Government Fiscal Policy: Mauritius must maintain fiscal discipline to avoid excessive borrowing, which could weaken investor confidence and pressure the currency.
Given these conditions, the MUR is expected to trade in a narrow band between 0.0210 and 0.0225 USD per MUR over the next quarter unless significant macroeconomic shocks occur.
Conclusion
The Mauritian Rupee has exhibited relative stability against the US Dollar over the last 100 days, with reduced volatility compared to the same period last year. This reflects a combination of monetary policy interventions, declining inflation, and moderate trade improvements. However, long-term risks remain, including inflationary pressures, dependence on USD-denominated imports, and global economic uncertainty. Maintaining exchange rate stability is critical for Mauritius’s economic growth, trade competitiveness, and financial sector positioning. The coming months will test the central bank’s ability to balance inflation control with currency stability in an evolving global financial landscape.
