THE shilling weakened by 12/- against the dollar on Wednesday, the highest fall in a single trading in the last ten months.
The National Microfinance Bank (NMB), Standard Chartered Bank, Exim Bank and Barclays bank quoted the shilling trading at 1,623/-, 1,609/-, 1,621/- and 1,610/-, respectively, against the dollar - the main trading currency.
The commercial banks attributed the loss to accumulated green back demand from the oil and manufacturing sectors that continued to pour into the market. "A reversal is unlikely as these market conditions persist," NMB said on its e-market.
The StanChart said the shilling lost the battle against the dollar as the market saw an influx in demand from the corporate sector despite the central bank intervention. "BoT (Bank of Tanzania) continued its presence in the market, however, market demand for the green back surpassed supply from the mining and agriculture sector.
"Today (Wednesday) we expect the shilling to further depreciate as we approach the month end," StanChart said on its daily market statement. The bank, however, was optimistic that the trend might reverse as corporate demand the local currency for taxes and salary payments.
Barclays Bank said the shilling is yet to see better days as the greenback continues to put it under pressure and intervention by BoT could not salvage the shilling from falling to lowest level since January. "Despite the Central Bank intervention, the market is still struggling to maintain the dollar at 1,610 levels as supply continues to be thin," Barclays indicates at e-newsletter.
Exim Bank said while the shilling is depreciating, the interbank market remains liquid with overnight rate hovering around the average of 5.0 per cent. BoT quoted the shilling exchange at 1,581/95 a US dollar, which was a slight better rate than the 1587/61 of ten months ago.
But was not a good rate in comparison to mid last month of 1,576/93. The weakening of the shilling as the economy approaches the year-end holiday season means the prices of imported goods and services going to be higher, thus dashing consumers' ability to spend.