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Zimdollar depreciates 4.5% to $72.14

by Staff reporter
21 Jul 2020 at 17:35hrs | Views
There was a 4.51% depreciation on the local currency against the US$ to 72.1470 at the close of the Reserve Bank of Zimbabwe auction of Tuesday with US$14.85 million being allotted at a cost of $1.07 billion.
According to the results, total bids received were at 290 but 51 amounting to about US$6 million were rejected for bringing in bids that do not qualify. A resolution was passed to consider imposing a fine in US dollars for participants who come to the auction with "dirty" hands.
A total US$2.5 million was from exporters at a rate of 75. Most bids put forward were in the 70s range with the lowest accepted bid at 70 while the highest rate was at 82.17. The lowest bid tendered was at 55. Of the allotted amounts, US$7.47 million went towards raw materials, US$2.3 million to machinery and equipment, US$1.29 billion retail and distribution, US$1.12 billion Consumables while the remainder was split towards paper and packaging, fuel, electricity and gas, pharmaceuticals and services.

RBZ governor Dr John Mangudya said that the auction system was a good pricing mechanism system. Mangudya said since the introduction of various measures from March, 64% of money supply in the country was now foreign currency, 36% local currency (converted at last auction rates). Loans were 58% local loans and 42% were denominated in foreign currency.
"The numbers show that money supply is not significant enough to push the rate"
Reserve money for banks as of last Friday was at $8.4 billion. "Of the $42 billion local currency, $23 billion are loans, the balance of $19 billion is made up of Treasury Bills, Savings Bonds, and other market instruments, with reserve money taking up the remainder. This means that the reserve money is low, the M3 is low, therefore there are no fundamentals that support the further depreciation of local currency."
Director of Exchange Control at the RBZ, Farai Masendu said that there was a gradual alignment of the exchange rates. "What we are happy with is that there is a flattening of the exchange rate in terms of depreciation signaling that we will achieve exchange rate stability."
He said that the central bank will continue to improve on the price discovery mechanism and will look at ways of incentivising exporters to come to the auction.

Source - finx