Shilling gains on low demand for US dollars

The shilling firmed slightly against the dollar on Tuesday, with interbank demand for dollars thinning off, leaving the local currency to trade in a peter-out band.

The National Microfinance Bank (NMB) e-market report suggests that the shilling is likely to remain stable because of a shrunk demand from the corporate sector.

"The stabilisation is attributed to some support from dollar inflows from agricultural sector," NMB said in daily e-Market report, quoting the shilling trading at 1,580/1,595 against the greenback.

Barclays Bank e-newsletter showed that shilling/US dollar continued to trade in a tight range, with no significant strength from the shilling.

"The market today saw rather quiet activity with no significant strengthening of the shilling," Barclays said. The bank quoted the shilling closing the day at 1581/1603 range.

The bank also said other international currencies --especially the Euro and Sterling Pounds -- continued high level of fluctuation but subdued at the end of the market day to close at the same levels as opening.

The Bank of Tanzania (BoT) indicates that the shilling opened the month at 1577.61 but slipped to 1583.51 against the US dollar as of Tuesday.

Tanzania Securities said the shilling is expected steadfastly for the reminder of the year because of recently downtick movement in the prices and inflation.

"We are expecting Tanzania's current-account deficit to remain above 10 per cent of GDP in both 2012 and 2013, which will mean that the shilling will remain vulnerable to interruptions in aid and investment inflows," the brokerage firm said in a study named 'Equity Research Local Listed Banks'.

The research pegged its projection on the fact that historically the local currency held up well compared with some of its emerging market peers. 

But it warned that the shilling remains vulnerable to shifts in investor appetite due to Tanzania's high current-account deficit, which is likely to increase in tandem with the higher oil prices and higher dependence on unreliable and unpredictable farm based economy.

"The current account deficit however," said the research, "remains a weakness to the overall economic performance, leaving Tanzania reliant on foreign aid and investment inflows".

Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel  Elinaza

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