Shilling set to gain further as year ends

The shilling is expected to stabilize further as the economy approaches the end of the year by receiving a boost from US dollar inflows from tourism and agriculture sectors.

The shilling, according to money market analysts, also expects to receive more support going in the last month of the year, for year‐end tax payments buoying the currency.

The National Microfinance Bank (NMB) says the pair—shilling/dollar—traded flat on closing the Monday’s session at 1,600/1,625. “However the shilling is expected to receive more support from dollar inflows from the tourism and agriculture.”

Normally, due to social interaction end year activities, including Christmas and New Year festivals, demand for shilling increase to enable holiday makers to travel and socialize with dear ones.

“This phenomenal is expected to push the shilling up, as consumers purchasing power is up following due to low inflation (6.3 per cent)” an economist, Mr Leonard Mwanga says.

Commenting on the future interest rate for government bonds after oversubscription of seven-year bond by 181 per cent last week, Bank M says the level will start to descend.

“As we approach end of year we expected subscription levels to start declining with funds being directed elsewhere to meet obligations like taxes, salaries, bonuses, holiday spending and so forth,” the Bank M says in a report.

Standard Chartered, says the shilling appreciated slightly yesterday as demand for the local currency increased compared to the foreign currency.

“We anticipate the trend to continue with low to medium market volatility expected today,” StanChart says in its Daily Market Report. Between 2003 and 2013, the shilling/dollar averaged 1322/78 reaching an all time high of 1797/40 in October of 2011 and a record low of 1014/30 in December of 2004.

Meanwhile, liquidity in the market remains tight, with banks trading at 10 per cent for overnight funds. Strong demand from large players as the market approaches month end indicates a possible slight hike in the rates.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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