• Mon. Jul 22nd, 2024

Current FX exchange stability remains fragile – Report

ByEconomic Times

Jul 13, 2023

By ETimes

The exchange rate stabilisation currently being witnessed in the country is only temporary, as there is still an unacceptably big premium between the official and alternative markets, a research firm said.

In its latest second quarter 2023 economic review and investment outlook, First Mutual Wealth indicated that the local currency weakened by 90% against the greenback.

“We believe that this stability is temporary because the premium between the official and alternative market remains unsustainably high at circa 47% (07 July 2023),” First Mutual Wealth stated.

It expects the exchange rate to become more volatile in the near future due to the market’s limited capacity to reach its actual equilibrium in the face of a ZWL liquidity shortage.

This comes as authorities issued a number of measures aimed at stopping the local currency from falling.

“We encourage the monetary authorities to further refine their local exchange rate management by opening the foreign currency market to the private sector via the banks which would allow corporates and retail clients to aid in this process of exchange rate discovery and ultimately stabilisation in the long term.”

After the period under review, the ZWL appreciated against the USD, although this appreciation was far less noticeable in the market for alternative exchange rates.

“The current stability however remains fragile as it is being achieved by, amongst other measures, delayed contractor payments and restricted access by economic players from USD liquidity at the official rate,” reads the report.

On the Reserve Bank of Zimbabwe’s foreign exchange auction Tuesday this week, the Zimbabwe dollar gained further ground versus the US dollar.

The weighted average for the recent wholesale foreign exchange auction was ZWL$4 998.8352.

The weighted average at the Wholesale Foreign Exchange Auction Results on June 6, 2023, was ZWL$5 251.0640, which is a substantial improvement from the previous week – Harare

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