5 November 2012

Tanzania: DSE Business Activity Seen Picking Up Steadily

THE shilling has depreciated to the lowest level since January after crossing the 1,600/- mark against the US dollar last week, due to high demand by the industrial and service sectors.

Since the beginning of this year the shilling has been trading at between 1,550/- and 1,590/- for the greenback. But lost much ground on Thursday and drop to 1586/1608, as quoted by many commercial banks.Money market analysts, however, said the trend is short-term and expected to return to normal in the near future, particularly once fuel shortage stabilises. At presenmt oil importers increase the demand for US dollars.

The National Microfinance Bank (NMB) said that the shilling further depreciation was pushed by demand from importers at interbank market."(The) demand from interbank, industrial, and service sectors still push up the value of the dollar in the market", the bank said on its e-market report.This was also seconded by Tanzania Securities Chief Executive Officer, Mr Moremi Marwa, who said major reason that made the shilling lose ground is increased demand by importers.

"There are a number of reasons, but is has mainly been pushed up by oil importers demand for the (US) dollars to cater for the current fuel instability at the market," Mr Marwa told the 'Daily News'.The CEO said hedging against further depreciation following market speculation could also be the reason for losing the ground further. Most people like to keep their money in dollars to avoid the effects of the shilling's declining value.

He ruled out the surge in demand for the local currency because the approaching Christmas festival as trade in gifts and other consumer goods is high.The Standard Chartered Bank said the shilling ended the month on the high as the dollar continued its recent surge against the local currency.

"We expect the dollar to at least maintain its current high levels with medium to low volatility," the bank said.However, the shilling strengthened on Friday to close at 1,587/1,602, as importers avoided buying the greenback at the recent highs.

"This downward correction of the pair is likely to continue into next (this) week, especially if it is well supported by continued US dollar inflows from agriculture, NGOs, and tourism," NMB bank said at its Friday's e-Market report.

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