admincurrency, comments which sent the shilling down to a new all-time low against the US dollar on Friday.
Governor Benno Ndulu said although the currency had hit a low on increased importers’ demand for the dollar, the bank would not move to defend the shilling.
“It won’t be to our benefit if we decide to artificially stabilise our currency . . . we would rather continue to deal with the main economic fundamentals,” Ndulu told The Citizen newspaper in an interview published late on Thursday.
The newspaper report said Ndulu refused to move to stabilise the shilling because it would reduce Tanzania’s competitiveness. Tanzania’s shilling breached the psychological 1 700 level against the dollar on Friday and traded at a record low of 1 706,0, Thomson Reuters data showed. Market players said the shilling might test 1 720 this week having broken the 1 700 barrier. Traders said market players moved quickly to cover their long positions on expectations the shilling could fall further.
“Traders have quickly reacted to media comments made by the governor. Everyone was looking to cover their long positions following speculation that the shilling would continue to slide in the absence of any intervention from the central bank,” said Hakim Sheikh, a trader at Commercial Bank of Africa, Tanzania.
“We reached actual trading of
1 705/1 715 today. These are unprecedented levels, the shilling could fall to 1 720 in the coming days if corporate customers come in with their demand.” – Reuters.
Sheikh said corporate customers were staying away from the market in the hope that the shilling would rebound.
“But if things remain the same, corporate customers will be forced to pick up dollars and the shilling will further decline.”
Ndulu said the central bank had been selling about $100 million a month for the last three months to try and control inflation, which rose for the 10th straight month in August to 14.1 percent. Analysts expect consumer prices to rise further.-Reuters
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