Why Pound Sterling is depreciating against Mauritian Rupees?

Answer 1

With the credit crunch in the US that cascaded to the UK, both the dollar and the sterling have been losing a lot of value compared to other currencies. Now that the US is managing their financial crisis, the UK is still feeling it coming.

With the housing market suffering and consumer spending decreasing, businesses are having a hard time. There is a lot of laying off and redundacies created.

The rupee is doing well because Mauritian imports changed lately towards china and Japan. The demand for dollars and sterling has decreased, yet our supply of sugar, textile and tourism is not suffering that much.

We should bear in mind that the rupees started going really low in the last 10 years when the economy in Mauritius was not going well. The increase in taxation and no proper investment in the country by the government did encourage the decrease in economical activities. In the meantime, the UK and US economy were having a good time. It was the technological and globalisation boom. Those countries have English as their main language and were having huge financial institutions that helps in this globalisation process.

Now that the economy of UK and US are suffering and inflation is quite a higher percentage than expected, economical growth is minimal. Uncertainties in taxation, asset value and government decisions are not helping either in the UK.

The problem now is that business as a whole in Mauritius works on a basis of "I'm used to charge this much, I will not charge less". Now that petrol prices are decreasing quite much over here (8% in the last two weeks), petrol prices should be decreasing by at least 15% in Mauritius because of the global oil prices and the exchange rates. That will not happen!! Products from UK and US should be having their prices decreased as well... this will not happen. But once the exchange rate goes up again, all the prices will go up.