THE shilling fell below strong support levels to hit a three-month low of 1580.11 yesterday, as the market saw slight increase in demand for US dollars.
The shilling to dollar exchange rate fell from 1577.97 of early October to yesterday's rate, while a gradual correction was expected from some agro and tourism related inflows.
The National Microfinance Bank (NMB) said yesterday that the shilling weakened after coming under pressure from the oil sector import demands. "The shilling to dollar ratio remains high as demand pressure is sustained," MNB said on its e-newsletter.
It added: "A gradual correction is in sight and some agro and tourism related inflows are expected to cool the market," implying the shilling could again gain in strength. The shilling maintained its range bound since January to trade between 1,550.00 and 1,598.00, as Bank of Tanzania (BoT) data shows but in recent weeks, it started losing its ground.
On the other hand, commercial banks quoted the shilling trading between 1,585.00 and 1,603.00 a dollar, which is the lowest rate since January, this year. Standard Chartered Bank attributed the shilling's battle loss yesterday to slight increase in the demand for dollars.
"Today (yesterday) we anticipate the dollar to continue its gain as its demand is expected to increase," StanChart said "volatility will remain low to medium," it added. Tanzania Securities Chief Executive Officer, Moremi Marwa, told the 'Daily News' recently that the major reason for the shilling's fall in the last three months was due to strong demand for dollars from importers.
"We are out of traditional cash crop exports and in the second quarter a mine (Geita Gold Mine) was temporarily closed for maintenance... this impacted negatively on the supply-side of foreign exchange," Mr Marwa said.
He also said there was increasing demand for fuel for normal vehicle consumption and energy generation, hence pushing up the demand side of the dollar in the forex markets. The closure of Geita Mine, one of the biggest gold mines in the country, reduced the availability of forex and it took time to put the situation back on track.
The mining sector grew by 1.2 per cent in the second quarter, compared to 5.6 per cent of last year mainly because of Geita Gold Mine's temporary closure.