Pataca reaches 4-year high, hurting local exporters

By
Luis Goncalves

The pataca reached its highest value since mid-2010 as the US dollar – which the city’s currency is pegged to through the Hong Kong dollar – rebounds against some of the major trading partners of Macau, such as Europe, China and Japan.
If a strong currency is good news for residents who want to buy foreign goods or travel to Paris or Tokyo, it means problems ahead for local exporters as products become more expensive outside.
According to data released yesterday by the Monetary Authority of Macau (AMCM), the exchange rate for the pataca against its major trading partner currencies increased in December to 101.6 points. This is the highest value since July 2010, a more than four-year record, AMCM data shows.
From November, the exchange rate of the local currency went up by one percentage point (0.99) and almost five percentage (4.91) points from December of 2013. The strengthening of the pataca has been constant during the last year, gathering greater momentum since the summer. As it’s pegged to the US dollar, the currency value changes more with the fate of the US economy and less with the local one, which is currently addressing its biggest crisis in years.
The recovery of the US economy has been growing in the last months with lower unemployment, rising exports and strong internal demand.
Especially when compared to Macau’s major trading partners: Europe is going through a deflationary cycle and almost no growth, Japan is coming up with measures to stimulate the economy, while China is growing much slower than expected and with credit shortages attached. All this makes the US dollar stronger than all these three regions’ currencies.
AMCM compares the value of the pataca to a basket of euros, yen and yuan to calculate the trade weight exchange rate that works also to ‘measure’ the competitiveness of Macau companies in foreign markets. The higher the pataca, the more expensive exporters’ products are outside Macau.
AMCM also announced that the foreign exchange reserves amounted to MOP131.4 billion as at the end of December. This represents a 2.7 per cent increase from November (when reserves topped MOP127.9 billion).
Today, Macau has in foreign reserves 12 times the amount of money in circulation.