HARARE – The Zimbabwe dollar is set to end the year on a firm note, with the local currency gaining by a marginal two cents to 81.85 to the greenback.
The positive change from last week’s 81.87 saw over 30 million United States dollars exchanging hands.
The foreign currency traded since the start of the auction in June has now topped half a billion United States dollars.
An increase in US$ demand on the parallel market has seen the rate shifting upwards although it remains range bound.
Rates are being quoted from $105 to $120 with demand mostly coming from small traders and individuals who are stocking up for the festive season. At the opposite end, the local currency appreciated after a six-week depreciation after it closed today’s auction at 81.8576 from 81.8765 attained last week.
The highest allotted rate for both auctions was at 86, which is down from last week’s 90 while the lowest rate was at 80. This narrowed the spread between to 7.50% from 12.50% last week. Main auction bids fell to 236 from 268 last week, a trend which will likely be sustained as companies go into their shut down periods characterised by minimal trading.
Bids from the SMEs sector, however, increased to 188 from 166 last week as most big companies who might not need the US$50 000 minimum are being accommodated at the smaller auction instead. Settlement terms for the SME auction are immediate while the main auction is still facing challenges only for settlements due to two banks.
A total of US$30.27 million was apportioned to both the Main Auction (US$27.72 million) and SMEs (US$2.55 million) after a combined 424 bids were accepted and 43 were rejected. The difference in the average weighted rate and the highest bid narrowed this week as it came in at 4.82% from 9.03% of the previous auction. The difference between the parallel market rate and the weighted average rate was at 22.04%.
Raw materials continued to receive the highest allocation at US$13.16 million, Machinery and Equipment US$5 million, Consumables US$2.93 million, Services $2.28 million, Retail and Distribution $2.36 million Fuel, Electricity and Gas US$2.45 million. Other amounts below US$2 million were allotted to Pharmaceuticals and Chemicals, Paper and Packaging.
Mobile money rates were unchanged at 98 and the cash rate held steady at 82. For change purposes, a lot of traders are using a rate of 80. Zipit for smaller amounts were at 100-103.
Cryptocurrencies are facing value reverse as they saw heavy losses on Tuesday as some traders are cashing in and going to Asia as it is seen as the growth continent of Q1 2021. As a result, Bitcoin lost 1.47% to $18 896.75. Ethereum and Bitcoin Cash also saw a day of losses on the market with the former shedding 2.09% to 577.82 whilst the latter closed 2.89% weaker at $275.57.
Meanwhile, elsewhere, the U.S. dollar gained on Tuesday, taking a breather from a sell-off that took it to its lowest in more than 2-1/2 years last week, as U.S. equities came under pressure after recent gains, while sterling slid as investors awaited the outcome of Brexit trade-deal talks.
“Any good news we had on the vaccines last week has been fully priced in, said Ron Simpson, managing director, global currency analysis, at Action Economics in Tampa, Florida.
“So I don’t think there’s anymore vaccine upside for equities. If equities remain under pressure, we’re going to see the dollar hold its own in the short term.”
An index tracking the dollar’s value rose 0.1% to 90.978.
Upbeat economic sentiment data from Germany lifted the euro earlier in the session, but it was last flat to slightly lower at $1.2104.
German investor sentiment soared more than expected in December on expectations that vaccines against the coronavirus would boost the outlook for Europe’s largest economy.
The ZEW economic research institute said its survey of investors’ economic sentiment moved up to 55.0 from 39.0 in the previous month. A Reuters poll had forecast a reading of 45.5.
So far this year, the euro has gained more than 8% versus the greenback.
Tuesday’s big mover was sterling, which sank against both the dollar and the euro.
With only three weeks to go for Britain to fully complete its exit from the European Union, leaders have failed to narrow differences on a post-Brexit trade deal.
Against the dollar, the pound was last 0.4% lower at $1.3323 It was also 0.6 lower against the euro, which rose to 90.82 pence . [GBP/]
“The market base case is clearly still a (slim) trade deal when judged from prediction and betting markets,” said Andreas Steno Larsen, chief global strategist at Nordea.
“No one really dares to call the no deal with WTO-tariffs scenario … we could still have a grim trading period ahead for the GBP if negotiations break down.”
Implied volatility on the pound – a measure of expected future swings in the currency – hit eight-month highs, a sign that traders were preparing for gyrations.
The dollar was up 0.1% against the yen at 104.16 yen, but it slipped 0.1% versus the Swiss franc to 0.8896 franc.
Overall, the dollar’s weak trend remained firmly entrenched, analysts said.
“The dollar is going to remain under pressure in 2021 and continue heading lower as economies reopen and also because there’s going to be a lot of demand for emerging market currencies,” Action Economics’ Simpson said.
