Today's Major Market Move: Seychellois Rupee Strengthens 8% Against Dollar in Past Week

The Seychellois Rupee looked like it was on the verge of joining the likes of Myanmar, Syria and Malawi on the list of countries with severely devalued currencies in 2012. But after an 8% decline in the Seychellois Rupee / US Dollar cross in the middle of July and another 8% decline this past week, it looks like the Rupee will avoid that fate for now.

Click here to go to the live chart.

Here's the reason for the dramatic turnaround in the middle of July (courtesy of Reuters):

Seychelles' central bank will intervene in the foreign exchange market to curb excess volatility which pushes up inflation, the Indian Ocean archipelago's central bank governor said on Thursday.

"The Central Bank has decided to intervene in the foreign exchange market order to smooth out the excess volatility, and to provide orderly market conditions as well as reduce eliminate any speculative element," Caroline Abel said in the capital Victoria.

Abel said the Seychelles' rupee had depreciated by 14.5 percent against the dollar and by 6.9 percent against the euro since the beginning of the year.

"The Central Bank is very concerned about the rapid depreciation of the domestic currency, particularly in recent weeks, given that it is translated into higher inflation," Abel said.

So far the central bank's efforts are succeeding and have almost drivem the USDSCR back down to the level of the peg that was being maintained up until September of last year (below is the same chart as above but with the time window extended back to the beginning of 2011).

Click here to go to the live chart.

Switzerland, Japan, Brazil, Colombia and Syria are some of the countries who have taken a crack at currency intervention in the recent past. The majority of interventions that have taken place in recent times have had the goal of weakening a currency. A central bank (theoretically) has an unlimited ability to do so. Strengthening a currency is a much more difficult proposition with the government and central bank possessing only a finite amount of firepower (foreign currency reserves). The market knows that if it can drive the intervening entity to the end of its fiscal rope, the value of the currency will inevitably tank.