Zim$ value depreciates by 34% on RBZ Auction
By Alois Vinga
THE ZW$ depreciated by a further 34% on the Reserve Bank of Zimbabwe (RBZ) foreign exchange auction Tuesday, sustaining a downward slide in a development which market watchers believe is quite reflective of the obtaining economic trends.
A trading update released at the close of business Tuesday shows that the exchange rate depreciated to US$1: ZWL 1 888 down from US$1:ZWL1 404 recorded last week signifying a 34% decrease inside just one week.
The latest development comes after another 14% fall recorded as of last week.
In comparison, the parallel market rates have reportedly reached a high US$1:ZWL3 500 as speculation remains rife in what has seen the businesses adopting forward pricing which has further complicated the situation.
Authorities have since announced a number of measures to curb further deterioration of the exchange rates.
Economist Persistence Gwanyanya believes that accelerated depreciation of the interbank rate is seen as supporting the restoration of equilibrium towards the alternative rates amid expectations that going forward; the refinement of the Dutch auction system will improve its functionality.
“As l have always argued, the RBZ should continue to maintain a watchful eye on the operation of the market because when left on their own, the market players can spin it out of control
“Faced with market failure, leaving exchange rate determination completely to the market could be disastrous. For an economy where wealth is concentrated in the hands of a few, there may need to aid the markets,” he said.
Meanwhile, out of the allotted funds the Main Auction received a total US$13,2 million with the SME Auction receiving US$958 000.
Raw materials, machinery and equipment received the bulk of the allotted funds in line with supporting productivity.