The shilling remained steady against the
US dollar since the beginning of this year, on the back of liquidity tightening
and moderate demand for the currency by importers.
Bank of Tanzania (BoT) data shows that
the shilling had been trading in a band of 1,584/- and 1,590/- against the
greenback in three months consecutively, signifying a new equilibrium
range.
The rate, in the last two weeks
stabilised handsomely at between 1589.00 and 1598.86 for the US currency.
Though the central bank denies that the
country is exercising a band exchange regime, the market trend indicates
otherwise as the shilling trades in the 1,580/- and 1,600/- a dollar.
BoT's Director of Economic Research and
Policy Dr Joseph Masawe said they were yet to change monetary policy on foreign
exchange and it remains a floating regime but a key agenda is to pacify the
economy.
"The shilling is unpredictable due
to a myriad of factors - the central bank wants to stabilise exchange rates by
avoiding fluctuations in the market," Dr Masawe told the 'Daily News.'
"Our policy is not to target the
exchange rate but to stabilise the shilling by maintaining circulation of
money," Dr Masawe said adding, "We have to balance between
intervention and T-bills interest rates to avoid distortions in the
market."
Standard Chartered Bank said the
shilling traded relatively flat against the dollar yesterday as demand
continued to be well matched by supply in the interbank as well as corporate
markets.
Experts say the stabilisation of the exchange rates is important for
the economy as it make it easier for businesses to function at full potential.
Shilling stabilisation also helped money
mongers to shift attention to debt instruments namely treasury bonds and bills,
and also to overnight borrowing and repurchase agreements (Repos).
Bankers have
it that today's auctioning of five-year Treasury bond remains to be seen well
received if the positive sentiment continues along the curve.
Their prediction based on the fact that
overnight rates moved down and the liquidity increases to shift some interest
to return to the bond markets.
"The market expects large turnout on the
issue, with pension funds expected to play a decisive role on yields.
The expectation is a decline in yields
between 200-300 basic points (bps) from the last yield at 17.05 per cent,"
Standard Chartered said on its daily market report.
Bank of Tanzania has put on offer today
a five-year bond as coupon rate of 9.18 per cent seeking to raise 35bn/-. The
shilling depreciated severely in the last four months from last October,
hitting 1,870/- the lowest level since inception of the shilling in June 1966.
Source: The Daily News,www.dailynews.co.tz, reported by
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