Zimbabwe Standard (Harare) May 9, 2004
Rangarirai Mberi
THE Zimbabwe dollar continued its decline against major currencies last week, but economists forecast the rate to find stability in the coming weeks. The dollar slid from $5271 to $5333,76 on the US dollar Monday, but was quoted stable at $5328 Thursday.
Experts expect the dollar to decline marginally this week, but say Thursday's auction had given the market hope that the dollar would hold on to current levels in the near term.
Century Holdings' Group Economist Moses Chundu traced the dollar's recent weakness to market reaction on Reserve Bank of Zimbabwe chief Gideon Gono's monetary policy review, in which he confirmed market feeling that he wants the dollar devalued.
"The rate is likely to stabilise before we get to $6000. The accelerated decline has been due to his (Gono's) statement, in which he announced the $5200 rate. The message the market got was that the Governor wants the dollar devalued to at least $5200," Chundu said.
The decline has however slowed in the last three auctions, Chundu observed, a sign that the dollar was close to stability.
Gono last month gave Zimbabweans living outside the country the option to cash in their US greenbacks at a new $5200 rate or at the auction rate, whichever was higher.
The market immediately reacted to Gono's announcement by knocking the dollar down to $4 700 - the level prior to Gono's concession - to around $5 000, souring his sweetener to entice exiled money within a week.
"The market has used Gono's $5200 rate as some sort of benchmark. We will see it come off at the next auction (tomorrow) but I suspect the rate should settle after Thursday," a dealer with a local bank told StandardBusiness.
The parallel market has in the meantime stalled, and the depreciating dollar takes the economy a few steps towards a convergence with the parallel market, which touched shock levels just below $8 000 on the US dollar last year.
Dealers and economists last week mostly played down fears the local currency's decline would take it to $6 000 and get the parallel market moving again. The economy would be unable to sustain rates above $6 000, economists said.