Shilling loses ground against US dollar

The shilling has continued to lose ground against the US dollar, despite this being the end of the month, when the demand for the local currency is always high.

Money traders expect the local currency to depreciate further, with little anticipation of appreciation.

The shilling, according to the rule of thumb, gains grounds at the last week of a month as corporate demand the local currency for tax and salary obligations.

Tanzania Securities Chief Executive Officer, Moremi Marwa, said the major reasons that saw the shilling losing its traditional battle at end-month is due to strong demand of greenback from importers.

“We are out of traditional cash crop export and in the second quarter a mine (Geita Gold Mine) was temporarily closed for maintenance…this impacted negatively on the supply-side of the foreign exchange,” Mr Marwa said.

He also said there is increasing demand of fuel for normal vehicle consumption and energy generation, hence pushing the demand side of the US dollar in the forex markets.

The closure of Geita Mine, one of the biggest gold mines, reduces the availability of forex and takes time to put it back on tracks from mining, extract and exporting.

The mining sector grew by 1.2 per cent in the second quarter compared to 5.6 per cent of last year mainly because of Geita Gold Mine’s temporary closure.

Standard Chartered Bank said  that the shilling behaved out of traditional pattern when the market saw the currency continuing to lose grounds unlike the previous past.

“We expect the shilling to further depreciate , however, the trend might reverse this week…where most corporate will demand shillings for salaries and taxes,” the bank said in its Daily Market Report.

Barclays Bank said the greenback chalked marginal gains against the shilling against money traders expectation that it would appreciate.

“The dollar continues to appreciate, contrary to the expectation of market players that the shilling will appreciate towards month end due to regulatory payments,” Barclays said on its e-newsletter.

Nevertheless, the shilling has continued to trade at between 1,550/- and 1,590/- a US dollar since January, this year, a range that experts say has helped to stabilize prices of imported goods and services in the economy.
Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza in Dar es Salaam
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