- Rate stands at 1US$: ZW$83.89
- The local unit fell from 83.75 in the prior week
- Poorest performance since the enactment of the auction system
After losing ZW$0.37 cents in value at last week’s auction held on the 16th of February 2021, the local currency enters the new weak a further ZW$0.14 cents down, trading at ZW$83.89 for a single unit of the U.S currency down from ZW$83.75.
The latest auction saw the total amount allotted slumping by over a million dollars from US$35.66 in the prior week to US$34,61 in the auction under review while the number of bids accepted on the main auction took a large tumble from 324 to 267.
The lowest allotted rate and the lowest bid received remained at ZW$82 however the highest bid received came down from the record high of ZW$89 to settle back at ZW$87.
This week’s performance breaks last week’s record and takes over as the poorest performance by the local currency in the foreign currency auction since its introduction by the Reserve Bank of Zimbabwe (RBZ) in June 2020.
This continued fall may also be detrimental to the RBZ’s target of month-on-month inflation under 3% with the ultimate goal of achieving year-on-year inflation of below 10% by the end of the year. This is evidenced by the 5.43% rate recorded in January 2021 when the local currency started falling.
While the foreign currency auction has been key in the relative stabilization of the macroeconomic climate in the country, the availability of foreign currency remains its lifeblood and the government should do all it can to keep and encourage a constant supply.
In the latest monetary policy statement, Reserve Bank Governor, John Dr. Mangudya said that export earnings had been the main source of foreign currency on the auction accounting for more than 70% of the total amount allotted to date.
“Export earnings have been the main source of funds for the auction through voluntary liquidations and the surrender requirements on exports and domestic foreign currency transactions. Of the total amount allotted on the auction to date, more than 70% has come from surrender requirements on exports and domestic foreign transactions,” the governor stated.
He continued to say the upward review in the surrender ratio for exporters from 30% to 40% is meant to further increase the foreign currency traded on the auction from exporters maintaining the lifeblood of the system.
The auction is also set to benefit from the increase in commodity prices already being experienced and expected to continue throughout this year as over 80% of the country’s foreign currency earnings come from pry products.
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