THE shilling is projected to firm further this week on the backing of quarterly tax obligations and salary payment, industry sources say.
Commercial banks quoted the shilling trading at between 1,575/- and 1,590/- and predicted the currency to gain further. The National Microfinance Bank (NMB) said the shilling closed the week strong due to steady inflows against moderate demand for the US dollar.
"The shilling has maintained its trading position with a positive outlook. This is due to quarter end tax payments and US dollar month end inflows," NMB said in a e-market report.
Seconding the NMB sentiment, Standard Chartered Bank (StanChart) said the shilling closed the week positively following matched flows in the interbank and corporate markets. "A similar trend is expected this week as we expect significant shilling demand on the back of tax and salary payments by corporate," StanChart said in its daily report yesterday.
Fortnight ago, the Bank of Tanzania (BoT) said the strong shilling could hurt exports and tourists inflows although it could lead to a lower imports bill. The BoT said it was important to balance the two as in most cases people forget about exports, which are the main source of the foreign currency.
But, financial analysts want the shilling to exchange for at least around 1,000/- and 1,200/- to a dollar to curb inflation. On other hand, the shilling's appreciation is a positive sign as it reduces the pace of goods and services prices movement. This movement if curbed helps to lower the current galloping inflation which is 18.2 per cent.
The shilling's stability has a relative significance on money markets. On the cash market it has recorded an improved liquidity position with highest overnight funds being offered 15.50 per cent, a decline from the previous higher offer of 17.0 per cent. The lowest offer rate remained at 13.0 per cent.