Black market currency traders in Sudan put their business on hold on Sunday to assess the impact of new government measures aimed at closing a wide gap between the official and unofficial forex rates.
From Monday, official foreign exchange bureaus will be allowed to buy and sell dollars based on the unofficial market rate rather than the official value of 2.7 Sudanese pounds for one dollar, said Abdelmoneim Nour al-Din, deputy general secretary of the forex dealers' association.
He said his association would announce a daily price and start buying at 5.2 pounds per dollar, slightly off last week's black market rate of 5.8 pounds to the dollar.
For the illegal black market traders who do business from street corners or cubbyhole offices, the new rules mean uncertainty.
"We're gonna wait and see," said one, who like many others had suspended operations.
"Today we stopped doing business. We will hold onto the foreign currency we have until the market stabilises" and the new rate becomes clearer, said another trader.
Bankrupt Sudan has lost billions of dollars in oil receipts since South Sudan gained independence last year, leaving Sudan plagued by soaring prices, a severe shortage of dollars needed to pay for imports, and a plunging currency.
The black market rate jumped above six pounds per dollar after South Sudan occupied the north's main oil region of Heglig in April, during border fighting which raised fears of all-out war between Sudan and South Sudan.
The government has stuck to its fixed exchange rate of about 2.7 pounds for one US dollar, but the black market rate has been well above 4.0 since late last year.
Asked whether the new rules for forex bureaus amounted to a devaluation, one economist said the answer was unclear and he was still trying to figure out what had happened.
"This is really legalisation of the black market," said another analyst, University of Khartoum economist Mohamed Eljack Ahmed. He added that the black market rate had essentially become the official rate.
He doubted the new rules will increase the amount of dollars in the economy or bring down the black market rate. Illegal traders would buy from the official dealers and hold their currency to sell at a profit.
At the same time, he said the measures will increase prices of imported goods, adding to the burden of Sudan's poor already struggling with an inflation rate that jumped to 28.6 percent in April.
One black market trader said the illegal rate will fall only if the central bank can inject currency into the market. "If not, the rate will go higher and higher," he predicted.
Local media reports last week said the government had received a large inflow of foreign cash which would help to strengthen the pound.
But if that were the case, the university economist asked, why had the government adopted the new rules for forex bureaus? Even if there had been an inflow of dollars from abroad, the government had not revealed the amount.
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EU finance ministers haggle over bank rules - Yahoo Finance
BRUSSELS (AP) -- European Union finance ministers are to meet in in Brussels Tuesday to hammer out an agreement over how high banks should build their defenses against future financial shocks, with the U.K. running the risk of being isolated over who should set the height.
The EU's 27 members agree on the need to increase capital reserves of banks, following an international agreement called Basel III, which was negotiated by the world's largest economies to avoid another financial meltdown such as the one brought on by the collapse of U.S. investment bank Lehman Brothers in 2008.
But the U.K. wants national regulators to be able to set requirements significantly higher than those of the EU — a position opposed by almost all other EU members, who fear investors might then prefer UK banks and flee from those in other countries.
On his way into the meeting Tuesday morning, George Osborne, the British chancellor of the exchequer, was non-committal about the possibility of reaching an agreement.
"This is a time of considerable uncertainty in the eurozone economies," he said, referring to the 17 countries — the U.K. not among them — that use the euro currency. "And that uncertainty is undermining the entire European recovery. And I think we're reaching a point where we've got to make a decision to see the eurozone stand behind their currency. A very important part of that, of course, is strengthening the entire European banking system. And that is what we intend to do today."
Once enacted, Basel III would require lenders to increase their highest-quality capital — such as equity and cash reserves — gradually from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times. All members of the G-20 have agreed to implement Basel III; if the European Union succeeds, it would become the first entity to institute the new requirements.
The U.K. is arguing that, because national taxpayers have to bail out banks when they fail, national authorities should be able to set more stringent requirements to guard against such failures. A compromise proposal offered by the Danes, who hold the rotating presidency of the European Union, would allow national authorities some leeway to increase requirements beyond those called for in the Basel III agreement. That proposal has broad support — except, so far, from the U.K.
The finance ministers can approve the compromise proposal without British support, through what is known as qualified majority voting, in which member countries have different numbers of votes according to their populations. However, there is a tradition in the EU that changes that would affect an industry in a particular country — such as the banking sector in the U.K. — are not forced into effect over the objections of that country, and consensus is sought.
"I think there should be a unanimous decision on such an important issue," Swedish Finance Minister Anders Borg said on his way into the meeting.
India's forex reserves drop by $1.37 billion - Economic Times
Foreign currency assets, the biggest component of the forex reserves kitty, fell by $1.33 billion to $257.85 billion during the week under review, according to the Reserve Bank of India's weekly statistical supplement.
The RBI did not provide any reasons for the change in foreign currency assets.
It said the assets expressed in US dollar terms included the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.
However, the RBI is understood to have sold dollars from the reserves to curb the slide in the value of rupee.
The Indian rupee slumped to a new intra-day low of 54.91 against a dollar Friday. This was the third consecutive record low of rupee in the last three days. The rupee had hit a low of 54.60 against a dollar Thursday, surpassing previous day's record of 54.52.
The rupee also hit a new closing low of 54.49 against a dollar Wednesday and ended the week at 54.42.
The value of special drawing rights (SDRs) declined by $25.6 million to $4.43 billion, and India's reserves with the International Monetary Fund ( IMF) fell by $16.7 million to $2.88 billion.
The value of gold reserves remained unchanged at $26.61 billion.
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