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Herald Reporter
The exchange rate fell below the psychologically important $5 000:US$1 barrier yesterday when banks bidding for wholesale funds to feed their business customers drove the weighted average exchange rate down to $4 998,8352.
Once again banks did not have enough local currency available to buy more than a little over a quarter of the US$20 million the Ministry of Finance and Economic Development had made available.
The 10 bidding banks sought US$5,83 million, but the bids of two banks were rejected and the eight successful banks bought US$5,64 million. The top bid of the eight banks, and that is what that bank paid for their currency, was $5 353,7221 for each US dollar. The luckiest bank paid just $4 900 for each US dollar.
This is the third time the Reserve Bank of Zimbabwe has declined to allot currency to some banks. It has been explained that the lowest bids face rejection if the range between the top bid and the bottom bid is too large.
On that basis those two banks offered below $4 900 yesterday, and possibly significantly below to have created the distortion that the Reserve Bank wanted to avoid.
While the Finance Ministry now puts up the funds the auctions are run by the Reserve Bank.
The much smaller auction for direct importers among large businesses saw only US$460 130,60 sold, again because of the shortage of local currency. This auction, once the centre piece of foreign currency procurement for businesses, is now just an addition for the major importers.
Almost all businesses now either earn their own foreign currency or go to their banks, and the bankers auction is where the banks stock up with US dollars.
The interbank rate today will be yesterday’s wholesale rate, $4 998,8352, but retailers will be able to use that plus 10 percent, $5498,72. Banks themselves are the only businesses which do not use the interbank rate, instead generating this from their own rates.
Each bank has its own buy and sell rates for foreign currency each day. They send these plus the amount of transactions, to the Reserve Bank which then calculates the weighted average and that is the interbank rate. So about half the banks are likely to charge more for a US dollar and about half less, although since banks vary so much in size the number on each size of the average can vary considerably.
But when there is a wholesale auction, and these are around twice a week recently, the auction weighted average is the interbank rate for the next day since that is the weighted average of what the banks were prepared to pay for a stock of US dollars.
The Zimbabwe dollar has now gained almost 28 percent in value since it hit its lowest value on 27 June, $6 949,1382:US$1, when a US dollar was almost $2 000 more expensive that it was yesterday.
Online Reporter