The average overnight rate has risen to 8.38 per cent as liquidity conditions in the economy remains tight.
Last Friday’s trading saw banks placing the lowest bid of four per cent and the highest at 9.50 per cent, an indication that money in circulation was tight.
Standard Chartered Bank said that at the close of the week, 61.4bn/- was traded, up from 57.4bn/-.
Standard Chartered Bank said that at the close of the week, 61.4bn/- was traded, up from 57.4bn/-.
“Overnight rates ranged between four and 9.5 per cent, with liquidity conditions remaining tight on the short end,” the bank said on its daily market report.
The overnight rate is the interest rate at which major financial institutions borrow and lend one-day or overnight funds among each other. The higher rates have negative impact on the price of the loan to bank customers.
The Bank of Tanzania (BoT) interbank Money Market shows that the last time the rate was up was in late July after climbing to 9.37 per cent, but eased to between four and six per cent before they climbed again to yesterday rate.
The overnight rate is the interest rate at which major financial institutions borrow and lend one-day or overnight funds among each other. The higher rates have negative impact on the price of the loan to bank customers.
The Bank of Tanzania (BoT) interbank Money Market shows that the last time the rate was up was in late July after climbing to 9.37 per cent, but eased to between four and six per cent before they climbed again to yesterday rate.
The BoT report shows that the highest overnight rate in this year was 12 per cent, which occurred twice - in early April and mid July - with the highest amount of money traded in a single-day being 88.6bn/- late last month.
National Microfinance Bank (NMB) said though the average overnight rate is moderately high, liquidity tightness continues to ease.
National Microfinance Bank (NMB) said though the average overnight rate is moderately high, liquidity tightness continues to ease.
“The rate (high bids) continued to ease bringing back the interbank lending rates to eight per cent on Friday compared to 10 per cent that prevailed yesterday (Thursday),”
NMB said on its e-Markets.2Overnight rates are a measure of the liquidity prevailing in the economy. In tight liquidity conditions, overnight rates shoot up.
Overnight rates may also shoot up due to lack of confidence amongst banks, as was observed in the liquidity crunch of 2008. Meanwhile, the shilling traded relatively flat against the US dollar at 1,626/- last Friday as inflows well matched outflows in the market.
“We expect the dollar to weaken today on the back of increased demand for the local currency, as we approach month end where corporate prepare to settle their salary and tax obligations,” Standard Chartered Bank said in a statement.
Overnight rates may also shoot up due to lack of confidence amongst banks, as was observed in the liquidity crunch of 2008. Meanwhile, the shilling traded relatively flat against the US dollar at 1,626/- last Friday as inflows well matched outflows in the market.
“We expect the dollar to weaken today on the back of increased demand for the local currency, as we approach month end where corporate prepare to settle their salary and tax obligations,” Standard Chartered Bank said in a statement.
Source: Daily News, reported from Dar es Salaam, Tanzania
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