Dollar weighs heavily on Tanzania shilling

The shilling has depreciated by about 5.0per cent in the first quarter of this year due to mostly strengthening of the US dollar against major currencies.

The analysis of shilling trend in almost three months since January compiled by the `Daily News’ shows that in January it started at 1,714/67 but dropped to 1,795/08 as at Thursday.

The Bank of Tanzania’s Monthly Economic Review of February attributed the fall to the strengthening of US dollar. “Shilling further depreciated driven mostly by the strengthening of the US dollar against other major global currencies following improved economic activities in the US,” the report says.

To cool the market, in January, BoT sold 64.8 million US dollars on net terms, which was 38.6 percent of the total sales in the market; the rest was from commercial banks.

BoT participated in the foreign exchange market mainly for liquidity management and smoothening of short-term exchange rate volatility. On Tuesday, CRDB bank said shilling rose by 5/- against the greenback during on Thursday’s trading session, closing at the levels of 1835/1845, thanks to end months obligations.

The shilling slightly appreciated “…due to an influx of inflows from the corporate sector meeting end of month goals,” CRDB bank said on its daily market highlights.

National Microfinance Bank (NMB) said the pair— shilling/dollar—traded thinly to close at 1817/1869 levels at least three shillings down from on Thursday close.

“The local currency extended gains against US dollar on Tuesday buoyed by tame demand from importers as we approach quarter end,” NMB says.

Despite being battered by the strengthening of the US dollar, the shilling has also suffered from withheld donor aid and traditional exports which fetch low price at the world market.

“On annual basis,” BoT report says, “average world market prices for selected commodities declined save for coffee and sisal.”

On the other hand, in January, the value of exports of goods and services was 8.85 billion US dollars, being 3.8 per cent higher than the amount recorded in the corresponding period in 2014 but failed to strengthen the shilling.

“This development was attributed to good performance in exports of manufactured goods and travel receipts,” BoT report says.

The increase was driven by manufactured goods edible oil, textile apparels, plastic goods, fertiliser and paper products, fish and fish products, and other exports.
Source: Daily News, reported from Dar es Salaam, Tanzania
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