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Monetary Policy Committee Financial Markets Developments J. Pandoo Head – Financial Markets Operations Division 14 July 2014
© Bank of Mauritius Volatility Indices 2
© Bank of Mauritius 3 2-Year Yields in Selected European Countries
© Bank of Mauritius 10-Year Yields in Selected Countries 4
© Bank of Mauritius Exchange Rate Developments 5
© Bank of Mauritius Movements of EUR & GBP against USD 6
© Bank of Mauritius Exchange Rate Movements 7
© Bank of Mauritius Exchange Rate of Selected Currencies vis-à-vis the US Dollar 8
© Bank of Mauritius Exchange Rate of Selected Currencies vis-à-vis the Euro 9
© Bank of Mauritius Bloomberg Spot Forecast: EURUSD & GBPUSD 10
© Bank of Mauritius Exchange Rate Outlook International Relatively weak fundamentals, deflationary risk (or persistently low inflation) in the Eurozone, unattractive interest rate differentials and the ECB’s deeper monetary stimulus will weigh on the Euro and support the US dollar. Strong economic numbers and higher inflation prints in the US are enough to keep the Fed on its tapering path and move towards higher interest rates in 2015. This further support the greenback. However, the US trade deficit deteriorated sharply, rising to its highest level in two years. The domestic environment is encouraging in the UK and the BoE is expected to be the first of the G4 to hike interest rates; this has supported the GBP. However, the BoE has forecasted in May that economic growth could start to slow in the second half this year which could potentially reduce the chance of an interest rate hike this year, causing the GBP to become vulnerable. Domestic The evolution of the rupee exchange rate is expected to be conditioned by developments in major currency markets as well as by domestic demand and supply factors. 11
© Bank of Mauritius 12 Money Market
© Bank of Mauritius Banks Excess Reserves 13
© Bank of Mauritius Issuance of BOM Instruments & Banks’ Excess Reserves (Rs bn) 14
© Bank of Mauritius Projection of Banks’ Excess Reserves (Rs bn) 15
© Bank of Mauritius BoM Securities: Issuance and Maturing 16
© Bank of Mauritius Maturity Profile of Bank of Mauritius Securities (Rs mn) 17
© Bank of Mauritius Weighted Yield on T-Bills & T-Notes 18
© Bank of Mauritius Yields on Long-Term GoM Bonds 19
© Bank of Mauritius 3-Month Interest Rate Differentials 20
© Bank of Mauritius 6-Month Interest Rate Differentials 21
© Bank of Mauritius 12-Month Interest Rate Differentials 22
© Bank of Mauritius BoM Intervention on Domestic Forex Market 23
© Bank of Mauritius BoM External Assets 24
© Bank of Mauritius Recent Policy Rate Cuts 25
© Bank of Mauritius Recent Policy Rate Hikes 26
© Bank of Mauritius Forecast of Policy Interest Rates 27
© Bank of Mauritius Policy Interest Rates (%) – GDP Weighted (JP Morgan) 28
© Bank of Mauritius 29 Stock Market Developments
© Bank of Mauritius MSCI World, Emerging & Frontier Market Indices 30
© Bank of Mauritius Developed Market Indices & SEMDEX 31
© Bank of Mauritius Emerging Market Indices & SEMDEX 32
© Bank of Mauritius Foreign Investment on Local Stock Market 33
© Bank of Mauritius Stock Market Outlook International Global stocks markets are holding near record highs on signs of an improving global economy and continued central bank support. Global equities are expected to extend their rally into the second half of the year mostly on the continued recovery and the ECB’s recent stimulus measures amid the low interest rates environment. However, global tensions and reduced stimulus from the Federal Reserve might keep stock market gains modest; further signs of an economic slowdown in China and future interest rate hikes in major economies could lead to risk aversion and affect equity markets. Domestic The local stock market is expected to remain supported in tandem with global equities although profit-taking and any potential retreat by foreign investors may somewhat limit its gains. 34
© Bank of Mauritius 35
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