Shilling depreciates against dollar

DAILY NEWS Reporter and Agencies
Daily News; Thursday,December 18, 2008

The Tanzania shilling has continued to weaken against the US dollar over the last few weeks, due to what dealers have attributed to increased demand for the US currency. They say that the pressure on the greenback comes from corporate clients, especially oil companies. Commercial banks quoted the shilling at 1,300/1,310 to the dollar, yesterday compared with 1,280/1,290 a week earlier.

Dealers said they expected the shilling to trade in the 1,280-1,310 range against the dollar in coming days. "There is still big demand from the oil sector and little supply," said Hakim Sheikh, a dealer at Commercial Bank of Africa Tanzania. "There are no dollars. We buy most of the time from the Bank of Tanzania and they intervene with very small amounts."

Dealers said telecoms firms, in addition to oil companies, were also seeking the US currency.
"We have seen some increased demand from mainly telecommunication companies coming to the markets," said Christopher Makombe, head of trading at Standard Chartered Bank Tanzania.

Dealers said there was also offshore demand for the dollar over the past week. Meanwhile, the Kenya shilling is forecast to firm further against the dollar in the coming week, helped by low demand for the US currency from corporate clients who are closing for the Christmas break.

At 1220 GMT, commercial banks quoted the local unit at 77.00/20 to the dollar, compared with last Wednesday's close of 78.10/20. The shilling was seen trading in the 76.50-77.50 range against the dollar in coming days. "Most corporates have already done away with their commitments and because most of them normally close for Christmas ... dollar demand has been suppressed," said Jeremiah Kendagor, head of foreign Exchange at Kenya Commercial Bank.

"There will be more of the same low demand ... I think the shilling will close on a firm note," he said. The shilling's day-to-day movements are boosted by U.S. currency inflows from sectors like tourism, agriculture and remittances from abroad, while dollar demand from areas like manufacturing and energy weaken the local unit.

In another development, the Uganda shilling is projected to remain firm against the dollar, due to an increase in year-end flows of the US currency and waning demand, dealers said.
Commercial banks in Kampala posted the local unit at 1,955/1,965 to the dollar, compared with last Wednesday's rate of 1,960/1,970. Dealers said they expected it to trade in the 1,950-1,980 range over the coming days.

"We have seen some year-end inflows coming in from the non-governmental organisations and Ugandans living abroad," said Denis Mushabe Mashanyu, a dealer at Standard Chartered Bank Uganda. Dealers said the shilling had been resurgent against the dollar in the past few days as demand for the US currency waned ahead of the Christmas holiday season. The Central Bank offered 65 billion shillings at Wednesday's Treasury bill auction. Last week the Central Bank rejected all bids for the 50 billion shilling two-year treasury bond.