No respite as shilling gains

The shilling anticipates a slight appreciation as it approaches the end of the month, but only for a short while before it goes down again.

Traditionally, the shilling gains at end of the month due to corporate demand for local currency to cushion tax obligations. It returns to a sliding mode thereafter.

The University of Dar es Salaam's Economic Research Bureau Researcher, Dr Semboja Haji said though currently the shilling was most stable in the region, it does not paint the real picture as all currencies in the region were at 'sickbay.'

"All three currencies (of Kenya, Tanzania and Uganda) are sick, the fact that one feels better only temporarily is not a big issue.

All are in sickbay," Dr Semboja, told the 'Daily News' in an interview. He said the shilling is not a major currency in the continent despite its stability regionally and it was still low when measured by industrial output and not agro-productivity.

"Even if measured by agriculture production, the shilling is not among major currency as the agriculture is not commercialised," the economist said yesterday. The shilling, according to the Bank of Tanzania (BoT), had fluctuated by merely 1.0 per cent since January compared to the other currencies in East African bloc that slides by between five and ten per cent.

The Stanbic Bank Regional Head - macroeconomic Research, Mr Phumelele Mbiyo said the since 2011 the shilling had gained in real term thus eroding the country's currency competitiveness bid against other shilling in the EAC.

"This might lead to economic growth impediment... this gain against other currencies (in the region) will undermine its competitiveness," Mr Mbiyo, who based in Nairobi, Kenya, said recently during the bank's country economic forum in Dar es Salaam.

A variation in the exchange of a currency in relation to a foreign currency can affect the competitiveness of export products, making them more or less expensive for foreign purchasers. 

Standard Chartered Bank (Tanzania) said yesterday the shilling traded relative flat against the US dollar as inflows matched outflows in both the corporate and the inter-bank market.

"We anticipate a similar trend today (Thursday) with a slight bias on a stronger shilling supported by end of month flows. Low to medium price volatility expected in the market," the bank said in its daily market report.

But National Microfinance Bank (NMB) said on Tuesday's session shilling went down to close at 1,625/1,645, following strong greenback demand felt across several sectors in the economy.

"As the dollar was well bid in the market up to the market's close, further weakening of the shilling is likely before the local currency finds respite," NMB said on its e-newsletter yesterday. However, BoT indicative rate for dollar against shilling ranges between 1,590/- and 1,606/-.

Currency analysts predicted the shilling will slide to 1,650/- a US dollar at the end of the year and closes the 2014 exchanging at 1,700/-. But said still the drop has insignificant effect on the economy.
Source: The Daily News, reported from Dar es Salaam
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