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- Jun 14, 2011
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[h=1]Shilling loses against dollar for 9 consecutive weeks[/h]
By The Citizen Reporter
Posted Sunday, June 8 2014 at 10:32
In Summary
The Tanzania shilling lost ground against the greenback on Monday, with large demand seen from the oil and manufacturing sectors.
Dar es Salaam. The shilling suffered again this week against the dollar after failing to recover the exchange rate ground it lost for eight consecutive weeks.
But the central bank is optimistic that the pressure on the local currency will soon ease.
The poor performance for the ninth week was also largely due to the limited supply of the greenback against its high demand by mostly oil importers and manufacturers.
The nine-week streak of losses is the worst ever recorded in over three years that some analysts have also associated with a slump in export earnings.
The exchange rate has fallen to the lowest levels so far this year during the period with the Bank of Tanzania (BoT) indicative rate for dollar buyers being above Sh1,650 the whole week.
The shilling hit the all-time low on October 28, 2011 when buying dollars reached over Sh1,800 in some outlets. BoTs indicative rates for buying and selling the US currency on that day were Sh1,667 and Sh1,692 respectively.
Although there has been talk of speculation, the money markets have so far remained calm with many dealers expressing confidence that it will soon recover.
The Tanzania shilling closed the week on a weaker footing, trading at 1,656/1,692, as market sentiment remained bearish of the local currency, NMB Bank said in a market report on Friday.
Sizeable demand from the manufacturing sector is seen putting pressure on the shilling well into next week, although a reversal is likely as we progress closer to the quarter-end, tax-payment period, it added.
BoTs indicative rates for buying and selling the greenback on Friday were Sh1,640 and Sh1,657 respectively. They were Sh1,636 and Sh1,652 last week and Sh1,637 and Sh1,654 on Monday.
Some banks had quoted it at Sh1,621 and Sh1,717 on Wednesday. Others had it at Sh1,622 and Sh1,718 on Thursday and Sh1,620 and Sh1,725 on Tuesday. In money shops, the highest buying rate was Sh1,690 and the lowest Sh1,675.
The Tanzania shilling lost ground against the greenback on Monday, with large demand seen from the oil and manufacturing sectors. This demand is seen placing added pressure on the local currency in the near-term, although liquidity tightness in the shilling money market could tame the dollar rally, the bank noted early this week. Exim Bank said in its foreign exchange and money market report that the current depreciation of the shilling against the dollar was temporary and that would be offset by earnings from the tourism season that starts this month.
That has also been the view of the central bank.
According to the BoT economic research and policy chief, Dr Joseph Masawe, the current depreciation of the shilling is a short-term phenomenon and it should not be considered a sign of slipping out of control.
For instance, while the shilling depreciated by only four per cent against the dollar from the end of January 2012 to the end of April 2014, the South African rand depreciated by 35 per cent, the Indian rupee by 21 per cent and the Japanese yen by 34 per cent.
Due to these developments, the shilling has gained from Sh202 per rand at the end of January 2012 to Sh155 at the end of April 2014. Likewise, the shilling has appreciated from Sh32 per rupee to Sh27 and from Sh21 per yen to Sh16, in the same period.
He said any currency whose exchange rate was determined by the market forces was subject to short-term fluctuations and long-term trend. The short-term fluctuations may be due to mismatches between supply and demand of foreign exchange, seasonal fluctuations and speculative tendencies, he explained.
Dr Masawe told The Citizen on Sunday that April and May were seasonally low months in foreign exchange receipts, particularly from traditional exports and tourism.
He said the limited foreign exchange earnings contribute to seasonal depreciation of the shilling during the two months.
As long as the observed depreciation is not supported by real and lasting changes in economic developments, it will be corrected by the market forces. Therefore there is no cause for worrying that the shilling is depreciating fast.
The shortage of foreign exchange in the economy would lead into the depreciation of the local currency that makes imports more expensive.
If a country cannot easily increase its exports with depreciation, inflation can easily set in motion economic decline and overall austerity.
BoT says the supply of dollars and other hard currencies is currently not a problem. Monetary and financial affairs manager Haika Mmbaga said the banks foreign exchange reserves had been on the increase year after year.
Over the past five years, she noted, the reserves increased from $3,553 million at the end of December 2009 to $4,676 million at the end of December 2013. These reserves were sufficient to cover 4.4 months of imports of goods and services.
The fears about dwindling foreign exchange are therefore not well founded, research manager Johnson Nyella said.
By The Citizen Reporter
Posted Sunday, June 8 2014 at 10:32
In Summary
The Tanzania shilling lost ground against the greenback on Monday, with large demand seen from the oil and manufacturing sectors.
Dar es Salaam. The shilling suffered again this week against the dollar after failing to recover the exchange rate ground it lost for eight consecutive weeks.
But the central bank is optimistic that the pressure on the local currency will soon ease.
The poor performance for the ninth week was also largely due to the limited supply of the greenback against its high demand by mostly oil importers and manufacturers.
The nine-week streak of losses is the worst ever recorded in over three years that some analysts have also associated with a slump in export earnings.
The exchange rate has fallen to the lowest levels so far this year during the period with the Bank of Tanzania (BoT) indicative rate for dollar buyers being above Sh1,650 the whole week.
The shilling hit the all-time low on October 28, 2011 when buying dollars reached over Sh1,800 in some outlets. BoTs indicative rates for buying and selling the US currency on that day were Sh1,667 and Sh1,692 respectively.
Although there has been talk of speculation, the money markets have so far remained calm with many dealers expressing confidence that it will soon recover.
The Tanzania shilling closed the week on a weaker footing, trading at 1,656/1,692, as market sentiment remained bearish of the local currency, NMB Bank said in a market report on Friday.
Sizeable demand from the manufacturing sector is seen putting pressure on the shilling well into next week, although a reversal is likely as we progress closer to the quarter-end, tax-payment period, it added.
BoTs indicative rates for buying and selling the greenback on Friday were Sh1,640 and Sh1,657 respectively. They were Sh1,636 and Sh1,652 last week and Sh1,637 and Sh1,654 on Monday.
Some banks had quoted it at Sh1,621 and Sh1,717 on Wednesday. Others had it at Sh1,622 and Sh1,718 on Thursday and Sh1,620 and Sh1,725 on Tuesday. In money shops, the highest buying rate was Sh1,690 and the lowest Sh1,675.
The Tanzania shilling lost ground against the greenback on Monday, with large demand seen from the oil and manufacturing sectors. This demand is seen placing added pressure on the local currency in the near-term, although liquidity tightness in the shilling money market could tame the dollar rally, the bank noted early this week. Exim Bank said in its foreign exchange and money market report that the current depreciation of the shilling against the dollar was temporary and that would be offset by earnings from the tourism season that starts this month.
That has also been the view of the central bank.
According to the BoT economic research and policy chief, Dr Joseph Masawe, the current depreciation of the shilling is a short-term phenomenon and it should not be considered a sign of slipping out of control.
For instance, while the shilling depreciated by only four per cent against the dollar from the end of January 2012 to the end of April 2014, the South African rand depreciated by 35 per cent, the Indian rupee by 21 per cent and the Japanese yen by 34 per cent.
Due to these developments, the shilling has gained from Sh202 per rand at the end of January 2012 to Sh155 at the end of April 2014. Likewise, the shilling has appreciated from Sh32 per rupee to Sh27 and from Sh21 per yen to Sh16, in the same period.
He said any currency whose exchange rate was determined by the market forces was subject to short-term fluctuations and long-term trend. The short-term fluctuations may be due to mismatches between supply and demand of foreign exchange, seasonal fluctuations and speculative tendencies, he explained.
Dr Masawe told The Citizen on Sunday that April and May were seasonally low months in foreign exchange receipts, particularly from traditional exports and tourism.
He said the limited foreign exchange earnings contribute to seasonal depreciation of the shilling during the two months.
As long as the observed depreciation is not supported by real and lasting changes in economic developments, it will be corrected by the market forces. Therefore there is no cause for worrying that the shilling is depreciating fast.
The shortage of foreign exchange in the economy would lead into the depreciation of the local currency that makes imports more expensive.
If a country cannot easily increase its exports with depreciation, inflation can easily set in motion economic decline and overall austerity.
BoT says the supply of dollars and other hard currencies is currently not a problem. Monetary and financial affairs manager Haika Mmbaga said the banks foreign exchange reserves had been on the increase year after year.
Over the past five years, she noted, the reserves increased from $3,553 million at the end of December 2009 to $4,676 million at the end of December 2013. These reserves were sufficient to cover 4.4 months of imports of goods and services.
The fears about dwindling foreign exchange are therefore not well founded, research manager Johnson Nyella said.