THE Zimbabwe dollar shed nearly 79% of its value on the
first day of being floated under a foreign currency auction system launched
yesterday.
At the close of the auction, the official exchange rate had
crashed to US$1:57,3582 from US$1:25 in the latest endeavour by the central
bank to stabilise the troubled currency. With the auction being held once a
week, it means the currency will trade at the new rate until the next sale on
Tuesday next week.
A total of US$10 345 250,04 was allotted at the end of
yesterday’s trading despite bids of $11,407 million, suggesting the market was
not liquid enough to meet demand.
According to the foreign exchange auction results the
Reserve Bank of Zimbabwe (RBZ) released yesterday, the highest bid was $100 for
one United States dollar reflecting the exchange rate currently prevailing on
the black market.
However, the lowest bid for the greenback was $25,50,
meaning someone managed to buy the United States dollar at a significantly
small amount.
Despite the opening of the foreign exchange auction, the
parallel market rate remained unchanged. Previously, the official exchange rate stood at 1:25 — a
fixed amount imposed in March by the RBZ, which has accelerated the
depreciation of the local currency.
In a breakdown of the total allotted amount, raw materials
received US$2 883 052,05; machinery and equipment (US$2 407 666,89); food and
beverages (US$1 398 340); services (US$1 308 996,12); consumables (US$1 286
995,43); portfolio investments (US$436 400,73); fuel, electricity and gas
(US$263 147,46); chemicals (US$257 015); livestock (US$53 636,36); and medicals
(US$50 000).
Financial expert Persistence Gwanyanya said that the
opening position of the foreign exchange auction was good.
“The way it is being conducted, in my view, is a step in
the right direction. It is giving mainly the buyers of foreign currency the
option to bid for that foreign currency,” Gwanyanya said.
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“The Reserve Bank is meeting the supply side of foreign
currency. Have you also seen that fuel has also bid in that auction system?
“We wanted some measure of relief of funds that would have
ordinarily been surrendered to the Reserve Bank to go into that market to
liquefy it.”
He added: “I can say the foreign currency exchange auction
system will provide a more credible meeting of the minds which would speak to
the whole transparency of the market.
“Now, as you can see, someone bid at $100 and the market
averages $57,35 meaning that this guy has bought at a very high price while the
market was willing to supply at a lower price. This means that the black market
rate is actually not reflective of the price that suppliers of foreign
currency, including the government, are willing to accept.”
He said if the market was broadened and widened, there
would likely be increased participation of all people into the market and more
efficient price recovery going forward.
“If you look at the amount of foreign currency that we
receive as a country, it may mean that the exchange rate is likely to soften
going forward, which would be good for an import dependent nation,” Gwanyanya
said.
However, he said the low bid of $25,50 meant that someone
bought the greenback at an even lower price than the weighted average, which
needed the central bank to publish the names of the bidders who would have been
allotted the greenback to ensure transparency.
Newsday
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