News Column

Shilling Weakens Over Oil Imports Pressure

February 5, 2014

Abduel Elinaza

THE shilling weakened against the US dollar yesterday after it failed to beat surging demand for the greenback from oil and manufacturing sectors. The shilling closed the Monday trading session at 1,615/1,640 a greenback as the market was expected to be bearish against the local unit. The National Microfinance Bank (NMB) said the shilling failed to hold its position after an increase demand from petroleum and manufacturing importers. "The market is expected to remain bearish against the shilling as increasing importer demand is anticipated," NMB said in e-Market yesterday. On other hand, Standard Chartered Bank said the currencies traded at a relatively flat rate yesterday as inflows matched outflows. "We anticipate a similar trend with low to medium market volatility today (Wednesday)," the bank said. Tanzania Securities quoting Bank of Tanzania (BoT) data shows that the shilling year-todate has depreciated by 2.26 per cent to sink to the lowest level in the last ten months, since last March. The shilling sunk to 1,624/- as of yesterday from 1,587/- at the beginning of the year. Recently, the Dar es Salaam Stock Exchange (DSE) CEO said shilling fluctuation has little impact on the performance of the bourse, because the demand to buy shares from overseas is still low to make its impact on exchange rates. The DSE Chief Executive Officer, Mr Moremi Marwa , said that foreign investors are buying shares of between 0.5 and 1.0 million US dollars which has little effect on the bourse and forex market. "We don't see direct relationship between foreign exchange market and bourse's indices," Mr Marwa told the 'Daily News,' because types of activities in participation have different motives. The CEO said investors are not selling dollars/shillings to invest in shares. In developed markets the exchange rates have significant impact on indices due to a big number of foreign investors who are reacting with the exchange movements. "We (DSE) are yet to reach there," he said, adding that developed markets react on inflation, GDP and exchange rates (but not the Dar bourse). The Orbit Securities , Head of Dealings and Operations, Mr Juventus Simon, said the bourse could react significantly if the level of foreign investors was high. "Shilling volatility could have a meaningful impact on the bourse should the demand to buy shares from outside soars... but it's still not that high," Mr Simon said recently. According to Trading Economics, the shilling averaged 1329/12 from 2003 until 2014, reaching an all time high of 1797/40 in October of 2011 and a record low of 1014/30 in December of 2004. The value of imports of goods and services increased to 13.58 billion US dollars last November from 13.01 billion US dollars recorded in the corresponding period in 2012. "Much of the increase originated from oil imports, rose by about 23 per cent when compared to the amount recorded in the year ending November 2012 ," BoT said.

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Source: AllAfrica

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