Shilling starts week on low gear

BoT HQ in DSM
The shilling started the week session with relatively muted trading, posting little buying activity though some players showed interest in the US dollar.

 However, Barclays Bank e-newsletter says that the end of month corporate requirements is expected to bring more participants in the market.   Most corporate firms' demand for local currency normally surges on month end basically for paying salary and tax obligations. 

“The shilling closed the week last Friday with bullish performance, recovering ground against the US dollar during the period under review but bracing with expectations of a build up bias for stronger currency as month end approaches,” stated the bank report.

High demand for US dollars by importers last week weakened the local currency, pushing it to an average of 1,600/-.    

However, Standard Chartered Bank said in its Daily Market Commentary  that the Central Bank (BoT) presence in the market calmed nerves and gave strength to the shilling towards end of the week. 

“The shilling, thus gained the strength during closing of business when it bounced at 1593/1598 levels,” said the bank report.  On the other hand, NMB e-markets reported the weakened shilling towards market closure on Monday as importers took advantage to buy  dollars cheaply despite the day starting off  with range-bound against the greenback.  

The report indicated that closing of business on Monday saw the shilling pegged at between 1,583/- and 1, 598/-. 

According to the Tanzania Securities Limited (TSL) weekly market commentary, the BoT strategy to shore up the shilling value seems to be working as the local currency has been gaining ground against major currencies in the past few weeks.  

The BoT close eye on shilling performance is aimed at striking a balance between exports, imports and other sectors like tourism which has played a key role on the economy.  But analysts hold that tightening liquidity will only help saving the local currency while giving hope to importers. 

Shilling stabilisation could persuade money mongers to shift their investments on debt instruments like Treasury Bonds and Treasury Bills as well as overnight borrowing and repurchase agreements (Repos).  

The interbank borrowing rates have been declining for the past few weeks, reflecting the current money market environment in the country.   However, the overnight rate towards the end of the week was slightly higher at 15.73 per cent compared to 15.71 per cent of the previous period.
Source: The Daily News
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