- Local unit fell by 0.31 cents
- Total number of bids went up 22% from prior auction record’
- Total of US$35,8 million allotted
The Zimbabwean Dollar started the new year ZW$0.31 lower in value against the US dollar than its last known position in 2020 possibly as a result of increased demand for US Dollars coming from the festive season going into the year.
The local unit settled at ZW$82.09 to a single American dollar at the auction held on the 12th of January 2021 falling by 0.03% from ZW$81.78 recorded at the prior foreign currency auction held on the 21st of December 2020.
The latest auction saw a total of US$35,8 million allotted compared to US$29,6 million in the prior auction while the total number of bids received shot up by 22% from 237 in the prior auction to 305 in the auction under review.
Of the 305 bids, 32 were disqualified for either not being eligible in terms of the Priority List or having overdue CDIs, outstanding Bills OF Entry (BOEs) or having sufficient FCA balances while in the prior auction of the 237 received, 10 were disqualified for more or less the same reason.
The low number of bids in the prior auction are indicative of the festive season which usually come with minimal trade and thus repressed demand for foreign currency which in turn strengthened the local denomination against the greenback.
Contrary, the jump in bids, signals a resumption of trade within the economy which consequentially increases demand for foreign currency despite the newly enacted COVID 19 lockdown as shown US$6,2 million increase in amounts allotted.
Meanwhile, the new policy tweak by the Reserve Bank of Zimbabwe’s (RBZ) Monetary Policy Committee (MPC) that dictates that the Bank will now retain 40% of all export earnings as an Export Surrender Requirement up from the previous requirement of 30% is expected to further increase foreign currency on the auction resulting in the strengthening of the local denomination.
This strengthening will also be capacitated by the expected sharp recovery in commodity prices in 2021 of which pry products contribute to 80% of Zimbabwe’s total foreign currency earnings.
Asked to give an outlook in light of these developments, Equity Axis economic analyst, Zvikomborero Sibanda said that the local unit is expected to maintain a solid run in 2021 as long as reserve money is kept under check and government spends sustainably.
The latest statistics from the Reserve Bank of Zimbabwe (RBZ) indicate that reserve money in the Zimbabwean economy went down by 5.5% in the week ended 31December 2020, compared to the results for the week ended 18 December 2020, as a result of sustained liquidity management operations.
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