Demand for local currency set to increase

The demand for shilling is expected to increase, strengthening the local currency as corporate seek to meet their end of month obligations.

Traditionally, the shilling appreciates at the first and last week of the month but sinks in the second and third week of the month as a result of demand and supply.

The Standard Chartered said yesterday they expected the shilling to appreciate over increasing demand because the market is heading toward the end of month.

“We approach the month end when most corporate clients demand the shilling for tax and salary purposes,” StanChart said on its daily market report.

The bank said it expected the shilling to appreciate against the US dollar with moderate levels of volatility. According to the Bank of Tanzania, the shilling opened the month trading at 1577/97 to close last week at 1579/85, positive fluctuation of 1/88 against the dollar, the main international trading currency.

The shilling begun the year at 1818/51 but has since gained to 1579/85, which is a gain of almost 300/- in the last nine months. On the other hand, Barclays bank said, the greenback continued to firm against the shilling as inflows further slowed down.

“However, buying customers remain averse to trade at the current levels,” the bank said in an e-newsletter. Meanwhile, the interbank lending rate has continued to rise tracking increasing treasury bill rates amid signs of liquidity tightness in the economy, sources in the money markets said.

Tanzania Security Chief Executive Officer Moremi Marwa said though the rates are on higher side the situation was alarmed as of last year when the same reached 40 per cent.

“High rate of interbank rates shows that banks are struggling to raise funds to meet their lending obligations…this increases the prices of loans and impact negatively on businesses,” Mr Marwa said.

Interbank are the rates which banks are borrowing each other in overnight deals and are normally at below five per cent. The better rate is around one to two per cent that facilitate positively on lending. 

The Tanzania Securities CEO said: “the rates are expected to climb to around 10 per cent in December when bank’s and individual’s money obligation increases.”

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

 

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