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The overnight rates reached a six-week high last Thursday signalling
liquidity drainage in the market.
On the average rates reached 14.80 per cent
after climbing rapidly since last month when trading between 5.00 per cent and
10.00 per cent.
According to Bank of Tanzania (BoT) data, since the beginning of this
month the rates started to climb rapidly to trade at 8.89 per cent before
advancing to 14.80 of last Thursday.
The overnight rate is crucial component to determine market interest
rates as are generally the rate that banks use to borrow and lend from one
another on the overnight market.
Standard Chartered Bank attributed the increase of the overnight rates
to liquidity tightening especially with few small banks which has seen a
gradual increase in the rates.
"We expect the same trend to continue to next week when some
maturities are expected back into the interbank system," the bank said on
its daily market report over the weekend.
The rates, according to the Standard Chartered, may also be pushed up
by the presence of National Microfinance Bank (NMB), the largest local currency
provider, at the market looking for shillings.
"NMB was seen in the market looking for shillings which may be the
cause behind the sudden shift in overnight and interbank liquidity," the
bank said in the report.
NMB treasury report said the "overnight rates trended slightly
upward in the Thursday's session - signalling continued dry markets."
The central bank data show that despite the high overnight rates the
amount traded also increases overtime in the last Thursday, the highest being
18 per cent while volume reported at 10.6bn/-.
Meanwhile, the shilling continues to trade flat against the US dollar
as the market in and outflows have been well balanced since the beginning of
this month.
"(The) shilling was steady against the dollar throughout today's
trading session on the back of a moderate demand for the greenback from
importers as investors settle their Treasury bond obligations," NMB said
on its e-market report.
The market closed at 1593/1598
on Wednesday and Thursday.
Source: The Daily News,www.dailynews.co.tz, reported by Abduel Elinaza
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