- Zimbabwean dollar depreciated 1% in August's first trade
- This was the first depreciation in 5 weeks
- Upcoming elections and foreign policy shift may have impacted market
Harare- The Zimbabwe dollar has witnessed its first depreciation during the first trade in August after a period of five consecutive weeks of appreciation against the US Dollar according to the latest data from the RBZ’s governed liberalised Auction Market.
The currency lost 1% of its value falling from ZWL4505.4232 last week during the last trade of July to ZWL4542.3710. However, the number of bids decreased from 16 in the prior week to 15 while the grand total awarded decreased too from US$600k to US$497k.
The depreciation of the Zimbabwe dollar coincides with the election month as elections are slated for 23 August 2023.
The upcoming elections in Zimbabwe may have contributed to uncertainty and volatility in the market, potentially leading to a decrease in demand for the Zimbabwean dollar and resulting in its depreciation. It is also worth noting that currency fluctuations are a normal occurrence in the foreign exchange market and are subject to a wide range of factors beyond any single event.
The Zimbabwe dollar's depreciation also coincided with Zimbabwe's recent shift in foreign policy regarding the Ukrainian conflict, where the country transitioned from its previous neutral stance to an alignment with Russia over the invasion.
It is noteworthy that the parallel market for foreign currency in Zimbabwe continues to transact at a range of 7500 to 8000 against the US dollar, indicating a significant premium. This divergence from the official exchange rate highlights the existence of market distortions, which can be attributed to a multitude of factors, including market sentiment, supply and demand dynamics, as well as underlying economic conditions.
In addition, Zimbabwe's history of post-election economic challenges is well-documented, characterized by inflationary pressures and exchange rate volatility resulting from policy slippages and political violence. This phenomenon was observed following the 2002 presidential election, the 2008 elections, and the 2018 elections, underscoring the potential economic impact of political events on the country's currency and broader economy.
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