14 May 2014

Tanzania: Shilling Continues to Lose Ground

THE shilling kept losing ground against the US dollar this week as demand seemed to be significantly higher than inflows at money markets.

According to the NMB e-markets report, the rising demand for foreign currencies is mainly driven by petroleum, manufacturing and telecommunication sectors.

Imports of various products have been spending a substantial amount of US dollars thus pushing up demand to keep the shilling falling.

For example, the Bank of Tanzania (BoT) monthly economic review for March shows that the value of imports of goods and services was 13,738.3 million US dollars, an increase of 8.6 per cent compared to the amount recorded in the year ended February 2013. And much of the increase was observed in oil, fertilizers and transport payments.

The value of oil imports rose by 24 per cent to 4,320.9 million US dollars due to an increase in volume as oil prices in the world market declined.

Although the prices in the world market dropped by 5.4 per cent to 937.9 US dollars per tonne, the volume of imported oil grew by 28.4 per cent to 4.6 million tonnes.

The impact of the increase in value of oil imports was toned down by a fall in the value of machinery imported, leading to a moderate increase in the total value imports of goods.

Similarly, the Standard Chartered Bank daily market reports show that the shilling on Monday traded relatively flat against the dollar as inflows matched outflows in the market. The pair is again expected to trade at same levels today with low price volatility anticipated in the market.

Other world currencies like the euro traded within 0.2 per cent of the lowest level in a month versus the dollar as Citigroup Inc. and UBS AG forecast further declines amid signs the European Central Bank is set to ease monetary policy.

The Japanese yen fell versus 12 of its 16 major peers after data showed Japan's current account surplus shrank more than economists had forecast. The dollar reached the highest level versus a basket of 10 major currencies in more than a week.

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