Shilling sta­ble as BoT mops up liq­uid­ity from mar­ket

The African - - MARKETS -

The first half of 2015 was bad for the Tan­za­nia shilling as it de­pre­ci­ated to new lev­els that sent prices of im­ports soar­ing.

Un­til June 2015, the Tan­za­nian cur­rency was lead­ing other East African units in the free fall­ing trend, courtesy of a de­cline in re­ceipts from some ex­ports, par­tic­u­larly gold and cot­ton, as well as low sea­son of tourism.

It had de­pre­ci­ated by at least 26 per cent since Jan­uary 2015.

The Uganda shilling, Kenya shilling and Rwanda’s Francs had de­pre­ci­ated by 20.9, 10.9 and 5.1 per cent re­spec­tively be­tween Jan­uary and June 2015.

The lo­cal cur­rency fell to a record level of Sh2,400 against the dol­lar dur­ing the last week of 2015 be­fore the Bank of Tan­za­nia (BoT) in­ter­vened to bring it back to Sh1,967/2,205 lev­els dur­ing the first week of July, 2015.

De­spite fears that it would fall fur­ther dur­ing the count­down to Oc­to­ber 25, 2015 Gen­eral Elec­tion, the shilling de­feated an­a­lysts’ sen­ti­ments and re­mained re­silient against the dol­lar. For in­stance, soon af­ter the elec­tion, it re­mained within the range of Sh2,140/2,225 in bu­reaux de change and the sit­u­a­tion has not changed much since then.

It has re­mained within the range of Sh2,180/Sh2,200 in bu­reaux de change even as the coun­try heads to­wards a new fi­nan­cial year dur­ing the com­ing few weeks.

The Bank of Tan­za­nia (BoT) at­tributes the sit­u­a­tion to its own pru­dent in­volve­ment in the in­ter­bank for­eign ex­change mar­ket as well as the forces of de­mand and sup­ply which are de­ter­mined by some global and do­mes­tic eco­nomic hap­pen­ings.

The BoT par­tic­i­pates in the in­ter­bank for­eign ex­change mar­ket by buy­ing and, or sell­ing the US dol­lars as way of re­duc­ing ex­ces­sive volatil­i­ties in the ex­change rate.

The in­volve­ment also in­cludes check­ing against un­war­ranted large volatil­i­ties in ex­change rate that are in­con­sis­tent with its longterm path.

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