Export earnings from agrisector stabilise the shilling

DAILY NEWS Reporter

THE increased dollar inflows from traditional exports have contributed to the gains of the shilling against the greenback. A large part of the dollar inflows come from cashew nuts, coffee, cotton, cloves, sisal products, vegetables, cereals and oil seeds.

Goods export improved on account of increase in volume and price. Similarly low demands from import sector as oil and manufacturing companies build up shilling positions following recent tax payments.

The Bank of Tanzania (BoT), monthly economic review for October shows that oil imports continue to dominate the goods import accounting for about 28 percent.

“With Dollar inflows coming in from the agricultural sector and low demands from the import sector, the local currency is still making some gains against the greenback; the shilling closed Thursday’s trading session at the levels of 2135/2175 against the Dollar,” stated the CRDB bank market highlights. More shilling strength is likely, although importer demand remains a risk for the TZS in the near-term.

The NMB Bank e-market reports show that the shilling strengthened slightly amidst sluggish dollar demand, as importers continued to build their shilling positions following recent tax payments.

Although the relative shortage in TZS will prop up the local currency, resumption of demand in the near-term remains a risk to the shilling. Likewise in the local money markets, short-term interest rates remain stable, with excess liquidity continuing to be felt from most market participants. Short term interest rates trade at about 7 per cent.

The Kenyan shilling was flat on Thursday, with traders expecting the local currency to remain in a tight trading range. At 07:30 GMT, commercial banks posted the shilling at 102.10/20, unchanged from Wednesday’s closing rate.

The shilling has been stuck in a narrow band of 102.00- 102.50 for weeks as importer dollar demand keeps it from appreciating beyond 102.00 and the prospect of central bank intervention keeps it from weakening past 102.50.

The Ugandan shilling strengthened helped by inflows of hard currency from nongovernmental organisations (NGOs) and subdued corporate appetite for dollars. At 0952 GMT commercial banks quoted the shilling at 3,325/3,335, compared with Tuesday’s close of 3,335/3,345.

Charities are converting some of their foreign currency holdings to balance their books as they prepare to close 2015, traders said.