ZW$ in first time gain on RBZ Auction, recovers by 8,6% against USD

By Alois Vinga

THE ZW$ value firmed up by 8,6% on the Reserve Bank of Zimbabwe Auction platform , signalling improved widespread usage of the local currency on the back of the economy’s swift response to economic measures employed by the Treasury recently.

The local currency suffered huge depreciation last month after tumbling by more than 100% against the greenback on the back of increased money supply and general speculative behaviour in the economy.

Contrary to expectations of further depreciation, a trading update published at the close of business Tuesday shows that for the first time since the inception of the Auction system, the local currency retreated to US$1:ZW$6 326 from US$1: ZW$6 926,57 reached last week.

The figure translates to a gain of 8,6% against the USD, a development which market watchers believe to be a signal for easing demand for the greenback.

Market watchers believe that recent measures employed by the Treasury are swiftly exerting positive market responses with improved usage locally as opposed to the past where companies and individuals were forced to exchange it for the greenback.

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To this end, the local currency is now the acceptable tender in the payment of most taxes on the back of a commitment to fund  25% export surrender requirement, maintaining US$ cash withdrawal tax at 2%, adoption of all external loans by RBZ and increasing consumers’ access to basic commodities – by lifting import restrictions on basic goods.

The Dutch Foreign Currency Auction was also liberated further by allowing the market to determine the exchange rates through the Willing Buyer Willing Seller (WBWS) system where banks receive foreign currency from the central bank at a wholesale floor price for onward selling to their clients.

In comparison, the parallel market dealers are struggling to pay premiums pegged by the official market with US$1:6 000 being the highest rate for those disposing of the greenback.

Meanwhile, the day’s trades saw the Wholesale Auction, a foreign currency trading platform created for large companies accessible through the banks receiving US$10,1 million while the Foreign Exchange Auction which now deals with smaller players received just US$797 323.

On the Foreign Exchange Auction productivity related needs like raw materials received  US$263 556, Machinery and Equipment US$126 774 and Consumables US$5 000 among others.