Mauritius’s rupee is heading for its lowest level in two weeks against the euro, with dealers accumulating the European currency as it offers better yields than the dollar. The local currency declined as much as 1.5 percent and was trading at 1.3 percent to 40.4329 per euro, at 11:10 a.m., in Port Louis, the capital. A close at this level will be the lowest since July 27, according to Bloomberg data. The rupee weakened against the dollar by 0.5 percent and was little changed at 28.04. The U.S. Federal Reserve said yesterday that it will maintain its record low interest rates through mid-2013, prompting increased demand for haven currencies. The yield on 3- year Treasury notes was at a record low 0.5 percent yesterday. Spanish and Italian bonds advance for a third day as the European Central Bank continued debt purchases. “There is a shift from dollar to euro”, said Nitish Benimadhu, a foreign-currency and fund manager at Anglo- Mauritius Financial Services Ltd., in a phone interview from the city today. “Investors and currency dealers prefer the euro as it’s available at a discounted premium at the moment since the ECB reassured investors of its willingness to continue its bond- buying program.” The euro is also seen as a less risky currency, “with the yield high enough to compensate for the risk element,” Benimadhu added. Standard & Poor’s cut its U.S. rating to AA+ after market closure on Aug. 5. “Risk element has increased on the dollar following the downgrade, Benimadhu said. ‘‘However, interest rates did not adjust to the change in fundamentals of the dollar in order to compensate for risk hike.’’ The euro, he added, offers a better real return than the dollar. Europe is the Indian Ocean island nation’s main trading partner, with 41 percent of foreign currency earnings in euros, according to Bank of Mauritius data. France is the country’s largest source of visitors, with 32 percent of tourist arrivals for the first-half of 2011, the Mauritius Tourism Promotion Authority said. To contact the reporter on this story: Kamlesh Bhuckory in Port Louis via Johannesburg at 1933 or gbell16@bloomberg.net To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

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