Higher dollar demand to pull down Shilling

After a positive performance during year-end period, the shilling started to losing some grounds against world major currencies largely due to pressure exerted by the mounting dollar demand.

Demand for the shilling to meet the year end obligations as well as the US dollar inflows from tourism and agriculture sectors boosted the local currency during the period under review.

"Further weakening of the shilling is likely as USD demand continues to build on the sidelines and may put added pressure on the local currency in the coming days," stated the National Microfinance Bank (NMB) in its e-market report.

The shilling slid against the greenback by about 10/- to close at 1,593/1,618 on Monday this week, with large dollar demand coming from retail traders and the oil sector.

According to the Standard Chartered bank in its Daily Market Commentary said the Shilling further depreciated against the Dollar yesterday as demand for the foreign currency gained momentum.

"We anticipate the trend to continue with low to medium market volatility expected in the coming days," stated the report.

Similarly Barclays bank's market report said the dollar gained some ground against the shilling at the beginning of the week as market players who oversold on the dollars were looking to cover their positions.

In the first week of January, the shilling demand continued to strengthen the local currency which moved back down below the 1600 mark at the close of the week.

However, the market experienced tight liquidity towards the end of the week as customers demand for the shilling increased in order to meet year end obligations.

In the East Africa and the global markets, the dollar held steady near a two-week high versus a basket of currencies after positive US economic data reinforced expectations the Federal Reserve continue to step away from its bond buying stimulus.

In the meantime, the overnight lending rates in the interbank money market reached the 12 per cent mark, following the past two weeks of tight liquidity. 
Source: Daily News, reported from Dar es Salaam, Tanzania
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