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Value of shilling remains stable

Value of shilling remains stable

Bank of Tanzania (BoT) data shows that the shilling had been trading in a band of 1,584/- and 1,590/- against the greenback in three months consecutively, signifying a new equilibrium range.  The rate, in the last two weeks stabilised handsomely at between 1589.00 and 1598.86 for the US curreny.

Though the central bank denies that the country is exercising a band exchange regime, the market trend indicates otherwise as the shilling trades in the 1,580/- and 1,600/- a dollar.  BoT's Director of Economic Research and Policy Dr Joseph Masawe said they were yet to change monetary policy on foreign exchange and it remains a floating regime but a key agenda is to pacify the economy.

"The shilling is unpredictable due to a myriad of factors - the central bank wants to stabilise exchange rates by avoiding fluctuations in the  market," Dr Masawe  told the 'Daily News.' "Our policy is not to target the exchange rate but to stabilise the shilling by maintaining circulation of money," Dr Masawe said adding, "We have to balance between intervention and T-bills interest rates to avoid distortions in the market."

Standard Chartered Bank said the shilling traded relatively flat against the dollar yesterday as demand continued to be well matched by supply in the interbank as well as corporate markets. Experts say the stabilisation of the exchange rates is important for the economy as it make it easier for businesses to function at full potential.

Shilling stabilisation also helped money mongers to shift attention to debt instruments namely treasury bonds and bills, and also to overnight borrowing and repurchase agreements (Repos). Bankers have it that today's auctioning of five-year Treasury bond remains to be seen well received if the positive sentiment continues along the curve.

Their prediction based on the fact that overnight rates moved down and the liquidity increases to shift some interest to return to the bond markets. "The market expects large turnout on the issue, with pension funds expected to play a decisive role on yields. The expectation is a decline in yields between 200-300 basic points (bps) from the last yield at 17.05 per cent," Standard Chartered said on its daily market report.

Bank of Tanzania has put on offer today a five-year bond as coupon rate of 9.18 per cent seeking to raise 35bn/-. The shilling depreciated severely in the last four months from last October, hitting 1,870/- the lowest level since inception of the shilling in June 1966.

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