Shilling woes continue, outlook gloomy

THERE is no reprieve for the shilling yet as it continued with its downward trend against the US dollars due to increased demand for the greenback exacerbated by its meagre inflows. Last week the shilling lost ground against all major currencies, a trend that was observed since the previous two weeks. The Bank of Tanzania (BoT) indicative foreign exchange market rates yesterday showed the US dollar was sold at 1717.61 and bought 1734.79. At midday, the NMB Bank quoted the shilling at 1676/1803, compared with 1674/1801 of Tuesday and 1672/1799 on Monday. It traded on the same level with the US dollar on Saturday. According to Standard Chartered Bank daily market commentary, the shilling closed the day on Tuesday where it opened the day as inflows were just sufficient to cover demand in the market. The bank expected the pair to again trade at the same levels yesterday with a slight bias on a stronger shilling due to declining demand towards month end. According to experts, the bearish run of the shilling is expected to continue until the end of the month. Meanwhile, Kenya's shilling fell to near three-year lows on Tuesday, weakened by dollar demand from companies, but its retreat was limited by speculation the central bank might intervene to prop up the currency. Traders said the shilling still had a weakening bias after retreating on Monday after Islamist militants ambushed a bus and killed 28 people near the Somali border at the weekend. At 0700 GMT, commercial banks posted the shilling at 90.20/90.30 against the dollar, weaker than Monday's closing level of 90.05/25. Earlier this month the shilling weakened to 90.25/35, its lowest level since November 2011. 'There is dollar buying from businesses that want to pay for their orders before closing by mid-December, in addition to the jitters that affected the shilling after the attack over the weekend,' Martin Runo, a senior trader at Chase Bank, said. 'We are seeing importers, manufacturers, the oil and telecommunication sectors buying dollars, but people are trading cautiously. No one wants to go past the 90.40-level because we have seen central bank selling around those levels,' he added. The central bank sold dollars on Thursday and Friday last week to prop up the shilling, on both occasions offering dollars when the local currency was around the 90.30-level. The shilling has weakened by 4.64 per cent against the dollar so far this year, under pressure due to a slump in revenues from tourism, a major hard currency earner that has been affected by a spate of militant attacks in East Africa's biggest economy. SOURCE: DAILY NEWS

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