Tanzania Shilling to fall further

The value of the shilling is expected to fall as demand for US dollars picks up at the beginning of the new month, which is a normal trend, financial analysts have said.

This follows a relatively flat trading against the dollar last week as inflows matched outflows in the market on the last day of the month when traders were meeting their end-month obligations including paying taxes.

“We expect the dollar to appreciate as demand pick up in the new month of May,” Standard Chartered Bank said on its Daily Market report.

It added: “Low price volatility is expected in the market.” Predication follows the fact that the shilling already started to lose ground at the last day of the last month which was attributed to raising demand from oil and energy sector.

CRDB Bank said the local currency slightly depreciated against the US Dollar on Tuesday trading session: “which is the result of increase in demand of dollar from oil and energy Sector.” At close of local interbank foreign exchange market, commercial banks quoted the local unit at 1623/1633 against the dollar, which was higher than Monday’s close of 1622/1632.

However, at the close of last Friday, the shilling traded at almost the same levels as of this Monday. “These were perfectly matched by US dollars demand in the manufacturing sector,” National Microfinance Bank said in its e-newsletter.

Tanzania Securities, a stock brokerage firm, predicted the shilling would depreciate to an average of 1,626/- a greenback this year and 1,670/- next year. “With the expected fall in the inflation rate (current at 9.8 per cent), the exchange rate should stabilise in 2013 and 2014,” the firm said in its recently released report.

The report said thought the shilling exchange rate is market determined, with only official interventions by the Central Bank to smooth out excessive volatility, the currency has not been volatile or overvalued, although it depreciates.

“Its continued depreciation could translate into higher domestic prices and result in inflationary pressures on the real economy, particularly through the cost of imported fuel and other inputs,” Tanzania Securities’ report says.

By Hilda Mhagama, Tanzania Daily News

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