- The Zimbabwe dollar traded at ZSL6.9k from ZWL5.9k
- It trimmed prior week losses by 24%
- However, it widened the premium by 31%, from 20% last week
Harare- The embattled Zimbabwe dollar shed by 14% on the latest Auction Market held on the 20th of June 2023. Though the currency continues to register double digits decline, the latest performance was the best since the beginning of May when it shed by 15%.
From depreciating by 38% last week which was a record weekly decline since 2019 when the rejected currency was introduced, the latest auction market trimmed losses by 24%, the best performance in circa two months.
The Zimbabwe dollar traded at 6926.5764 per dollar from 5978.6794 last week.
However, the latest trade against the greenback widened the premium, from 20% last week to 31%. The Zimbabwe dollar continues to trade at 10000 against the dollar on the parallel market, widening the gap with the so-called liberalised auction market rate.
Continued widening of the premium between the two markets indicates a loss of confidence in the market in the Zimbabwe dollar. The Zimbabwe dollar has failed to do one simple thing, value keeping increasing traffic on the US dollar.
However, the pain is felt by the exporters who relinquish 25% of their forex proceeds through surrender portions. This means with the Zimbabwe dollar declining on a weekly basis by huge margins, they incur huge exchange losses as suppliers are beginning to reject Zimbabwe dollar payments and where the Zimbabwe dollar payments are accepted, suppliers are tracking the parallel market rate.
Local companies incur losses through exchange losses.
Therefore, to avoid huge exchange losses, companies have to dispose the 25% Zimbabwe dollars imminently and this can be done through the black market where the US dollar is sold at inflated prices.
With this cycle continuing, it is difficult to have a stable Zimbabwe dollar, a non-volatile exchange rate and thus, increased US dollar suppliers as surrender portions hurt exports.
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