Interbank rate stable in October
The Zimbabwe dollar remained largely stable in the month of October, with the interbank foreign exchange rate shifting by a marginal 3,1 percent from 15,1979 to the United States dollar on September 30, 2019 to 15,6467 and October 31, 2019.
This could be pointing to the idea that the local currency may have reached a point of “equilibrium”, although some observers have opined that the Zimbabwe dollar’s real point of equilibrium is around 7 to the US dollar.
Earlier in February, Zimbabwe moved away from the fixed exchange-rate regime after authorities introduced the interbank market to allow importers and exporters to trade the Zimbabwe dollar and other foreign currencies with the rate initially pegged at 2,5 against the US dollar.
Prior to the interbank rate’s stabilisation during the course of October, the local currency had depreciated by 84 percent from the initial rate of 2,5 at the end of February 2019 to 15,1979 as at September 30, 2019.
Official figures from the central bank show that circa US$1,3 billion has traded on the interbank market since its inception in February.
The apex bank’s recently constituted Monetary Policy Committee (MPC) in its maiden statement said it fully appreciates the role of an efficiently functioning interbank market to the overall stability of the local currency.
To this extent, the MPC said, measures will be instituted to both “widen” and “deepen” the interbank market.
“The Committee agreed that the efficiency of the interbank foreign exchange market remains a critical variable for the stabilisation of the exchange rate. Accordingly, it agreed to the need for deepening and widening interbank market trading activities so as to attain the desired efficient operation of the market. This should ensure a stable exchange rate and efficient foreign exchange allocation through the market.
“The Committee took note that to ensure transparency and effective monitoring, the Reserve Bank will shortly introduce the Reuters system for foreign exchange trading by all banks.
“Furthermore, the Committee underscored the need for banks to put available foreign exchange balances on the market for trading purposes. In this respect the Reserve Bank will also make efforts to increase the flow of foreign exchange to the market,” said the MPC following its first meeting last month.
“The Committee also noted that the volume of trades conducted on the interbank market to date are significant but calls for further improvements. In this regard, it underscored the need for further refinement of the activities of the interbank market.
“The envisaged refinement, will include broadening the scope of the permissible products that Bureaux de Change can offer to compliment the activities of banks under a well-regulated operational framework.” – Business Weekly.