AfricaPress-Tanzania: THE shilling is projected to maintain its stability against the US dollar in this quarter three, backed by agricultural inflows which are expected to match with demand.
The stability, according to some analysts prediction was based on the fact that the economy is at the start of most cash crops seasons— which has supported the shilling dearly.
Also, the central bank’s active and strategic participation at the foreign exchange market to maintain orderly market amplified the stability.
According to NMB latest Market Digest, the shilling in quarter two traded sideways with limited volatility thanks to tightness in foreign currency liquidity.
“Looking ahead to the upcoming quarter, the expectation is for further currency stability…,”NMB report showed.
The report cemented its expectation from inflows that continue to come in from cotton, coffee and tobacco and expected to match the demand from importers.
Also “the central bank continues to actively participate in the market to maintain orderly market condition,” the report said.
At the Interbank Foreign Exchange Market (IFEM), the shilling opened at the quarter at 2,313/- to the dollar and depreciated slightly to 2,319/- which was the quarter high before appreciating to 2,314/- where the pair entered a period of consolidation.
“From here [at 2,314/-] it managed to hold its ground well for the reminder of the quarter before going slightly up again to 2,318/- where it closed,” NMB said.
The volumes traded in the IFEM decreased by 41 per cent from the 191.48million US dollars traded in the preceding quarter to 113.08million US dollars during the period under review.
“IFEM members opted for back-to-back customer covers as price discovery and liquidity continued to be limited,” the report showed.
In the year to date, the shilling depreciated against US dollars by 2.13 per cent thanks to inflows from mining and agri-sector.
The shilling exchange rate data showed that commercial banks opened at 2,300/- at the beginning of the year and closed at 2,349/- on Monday down by 2.13 per cent.
However, Bank of Tanzania data showed that the shilling opened the year at 2,299/97 and closed the Monday trading at 2,309/13.
Despite dropping in almost eight month, on a weekly basis the shilling held its position in the last three weeks in row. Orbit Securities said in its Weekly Synopsis yesterday that it maintained stability in the past three weeks.
“The shilling has maintained stability while appreciating for the third week in a row,” Orbit said.
The Bank of Tanzania participated as a net seller for liquidity management purposes to maintain orderly money market conditions.
