Auction rate drops 36,5 pc

Herald Reporter

The value of the Zimbabwe dollar on yesterday’s auction of US$15,27 million dropped just under 36,5 percent from the previous week with the weighted average calculated at $2 577,0564:US$1.

Yesterday saw the second pure Dutch auction since the Ministry of Finance and Economic Development upgraded the auction system to reflect more precisely how markets were able to fix the value of a US dollar. 

Last week’s auction saw a similar drop in their weighted average of around 34 percent.

The interbank market and the resulting interbank rate are likely to reflect the new auction rate within a  day or two as the foreign exchange auctions are seen as the main market maker. 

While the two drops in value have been significant, they are unlikely to have much effect yet on pricing as too many in industry and commerce have been following the black market rates, and the dealers in those markets have generally been pressing for greater value drops. 

However, the premiums among the plethora of black market rates are starting to narrow.

Yesterday’s auction saw acceptable bids of almost US$44 million for the US$15 million on offer. Acceptable bids mean that the bidders’ paperwork was satisfactory, that they did not have foreign currency accounts with more money than they bid for, and that their local currency account could cover the bid.

All bids of $2 500 or more were allotted on both the main auction and the SME auction. 

The top bid on the main auction was $3 000 and that on the SME auction was $3 100. With SME bids being for far smaller amounts there can be a tendency for a slightly higher top bid as only a few thousand more dollars are required, while those bidding for far larger sums will try to be more precise, bidding enough to get an allotment, but without paying too much over the average.

The total allotted to the 129 successful bidders on the main auction was US$13 483 681,07 and the total for the 174 successful bidders on the SME auction was US$1 782 414,85.

Raw material importers dominated the auction, to a greater extend that usual, with more than half the total allotted and more than half the main auction allotments of US$7,3 million going on this item. 

This tends to reflect both the need by importers for continued raw material supplies and the fact that a fair number have already brought to account the price increases through following the black markets.

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