Shilling set for bright future

The shilling is predicted to strengthen further this week on the back of increased inflows from agricultural exports and demand for the shilling by corporate to settle month end obligations.

The local currency started showing signs of recovery last Friday after appreciating by one shilling to close at 1,613/1,625 per US dollar. 

The National Microfinance Bank (NMB) attributed the gain against the greenback to inflows from agro-exports and corporate firms that convert dollars into the local currency to settle tax and salary liabilities.

“Further strengthening (of the shilling) is likely as we still have five more trading sessions to end the quarter,” NMB said in its e-Market newsletter. 

Standard Chartered Bank termed the trading between dollar and shilling as flat and showing the continuation of the period of low trading gripped the foreign exchange market last week. “…

The dollar/shilling pair traded relatively flat (last Friday) as the period of low trading activities in the market continue. We expect the trend to continue today with low price volatility in the market,” StanChart said on its daily market report.

Though the shilling shows sign of recovery towards the end of this month, the 1,625/- level reached was the lowest rate traded in about 20 months since December 2011. 

Bank of Tanzania (BoT) records show that the lowest lifetime rate the shilling experienced was 1,797/40 in October 2011.

The alarming depreciation of the shilling then prompted the central bank to intervene in the market to salvage the local currency. 

However, the shilling fall was described as a normal shock that could be absorbed well by the markets without derailing macroeconomic fundamentals.

However, economists belittle the depreciation as normal currency behaviour and the inter-bank market shows that the shilling continues to lose ground due to surging demand by importers.
Source: Daily New, reported from Dar es Salaam, Tanzania
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