Money squeeze help shilling to stabilise

Persisting liquidity squeeze has helped the shilling to cool off trade tension with US dollars to trade at steady rate, though the condition seems temporary.

The shilling maintained its stance in the last two days of last week to trade at 1604/1623 a greenback while analysts anticipate further strengthening of the currency.

However the steadiness has not helped the shilling to appreciate from the loss registered since the opening of this year of about 2.0 per cent.

The National Microfinance Bank (NMB) said the pair cooled off on last Thursday trade session as liquidity squeeze persists. “However moderate demand for hard currency was seen across all sectors,” the bank said in its e-market report.”

The importers, usually oil and telecommunication, were holding their demand in anticipation of further strengthening of the shilling.

Standard Chartered Bank said the currency pair—shilling and dollar—continued to trade at a steady rate last week as inflows matched outflows.

“We anticipate the trend to continue with a slight bias on a stringer shilling,” the bank said. StanChart further said low to medium market volatility were expected in the market by Friday last week.

NMB said the liquidity tightness was still pronounced in the interbank money market with overnight borrowing rates at double digits last Thursday.

However, on a weekly basis, Tanzania Securities said the liquidity improved during the week after with interbank rate went down to 11.49 per cent from 12.54 per cent in the previous week.

The easing of the liquidity situation was also witnessed on the mid-week’s Treasury Bills auction which was oversubscribed by 140 per cent, despite the fall in yields rates.

Bank M said the T-Bill yields retreated slightly midlast week as market liquidity eased and “investors rush to lock in yields in anticipation of further declines”.

…Prices across all the three subscribed maturities went up pulling yields down (Price move inversely to Yield),” Bank M’s Vice President and Head of Treasury Henry Lesika said.

The yields fell 1, 38 and 71 basis points to 13.74 per cent for 35 days, 15.19 per cent for 182 days and 15.26 per cent 364 days respectively.

“However the consolidated yield for the auction moved up due to a larger weight in the 364 days being a result of higher successful amount in that bucket,” Mr Lesika said.

Analysts, however, said it is premature to predict the movement of the shilling in the first month of the year.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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