Tanzania: Shilling Remains Steady On Exports Flow

THE shilling continues to hold steady against the US dollar since the beginning of the year thanks largely to agricultural sector exports.

The local currency opened the year trading at 2,309/04 against the greenback but depreciated minutely to 2,310/11 yesterday.

The shilling, thus, dropped by merely 0.046 per cent in the last three and half months.

NMB Bank said in its Daily e-Markets report of Tuesday that the shilling was steady despite observing demand from manufacturers, oil marketing companies (OMCs) and SMEs which was cushioned by agri-inflows.

"We observed demand from manufacturing, OMCs and SMEs sector supported by dollar inflows as harvesting season continues and Agri commodities traders specifically pulses," NMB e-Markets report said.

However, on weekly basis, the shilling kept on weakening against the dollar dropping to 2,310/07 at the opening of this week up from 2,310/02 of the previous week.

The Orbit Securities projected on its weekly market synopsis report that the shilling is heading into rough seas ahead following a global prices crisis after the Eastern Europe war between Ukraine and Russia.

"With worsening trade terms due to the ongoing war while the country is a net importer, the pressure on the shilling is expected shortly," Orbit said in the report.

Tanzania is importing almost 900,000 tonnes of wheat from Ukraine and Russia--where the big chunk comes from Moscow. Tanzania produces only 100,000 a year.

The shilling also is facing a tough stance after global oil prices jumped northwards due to the war in Eastern Europe.

Globally, oil prices edged higher Wednesday after Moscow said that peace talks with Ukraine had hit a dead end, fuelling supply worries, while weak economic data from China and Japan kept a lid on gains.

Brent crude rose by 48 cents, or 0.5 per cent, to USD 105.12 a barrel by yester-morning while US West Texas Intermediate (WTI) crude futures gained 28 cents, or 0.3 per cent, to USD 100.88. Both benchmarks had surged by more than 6 per cent on Tuesday.

Nevertheless, the Bank of Tanzania's interbank cash market (IBCM) last week traded 43.5bn/-, about half of 110bn/-that was transacted the previous week.

"The trend on the IBCM suggests that the banking system has sufficient liquidity hence the competitive rates," Orbit said.

The interbank rate has slightly improved to 1.76 per cent from 1.5 per cent the previous week, albeit still one of the lowest rates to be recorded by the BoT in recent years.

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