The Zimbabwe dollar saw its smallest move since the start of the auction system yesterday, easing one ten thousandth of one percent and effectively remaining unchanged at $81,67 to the United States dollar as almost all importers continue to set their bids at the prevailing rate.
The actual weighted average moved one hundredth of a Zimbabwean cent from $81,6740 to $81,6741.
Stability has been built on the determination of the fiscal and monetary authorities keeping the fundamentals solid and keeping a tight leash on money supply with the Treasury funding Government pending out of taxes and the Reserve Bank of Zimbabwe evening out any fluctuations in liquidity.
Expectations going forward are that the local currency could strengthen on the back of a weakening US dollar as global markets respond to the results of the US presidential election.
Reserve Bank figures at October 30, show that reserve money declined by $1,1 billion to $15 billion,
“The decline in reserve money over the week under review was largely due to issuance of open market operations instruments by the bank, designed to sterilise idle liquidity in the economy,” explained the RBZ.
“Purchases and sales of foreign exchange on the auction by the RBZ also resulted in net withdrawal of liquidity from the market.”
Yesterday’s auction, for example, moved around $2,6 billion out of importers’ bank accounts into the Reserve Bank, a large block of cash.
Although the fundamentals look good, and the Reserve Bank of Zimbabwe’s foreign currency auction system has worked to entrench stability in the economy, the greatest threat remains non-compliant businesses that continue to price their goods and services on a speculative basis rather than on what is now seen as stable costs.
“We have been made aware of some distortions currently happening in the market and it is critical that sector players adhere to the regulations set out by Government,” said Confederation of Zimbabwe Retailers president Denford Mutashu recently.
“However, it is therefore critical for Government to address systems and software compatibility while availability of fiscalised machines remains a critical necessity.”
Yesterday’s auction saw total bids on the main auction rising, with 268 bidders from 260 last week, but still lower than the prior week’s record high of 274.
Of these, 248 bids from the big corporates were successfully allotted a total of US$29,9 million the second highest ever. Failed bids once again were over paperwork, rather than underbidding with all bids that met the RBZ conditions being allotted.
The highest bid on the main auction fell to $86,30 from $90 previously, while the lowest accepted bid remained on $80.
The narrowing bid band seems to be the result of even the most pessimistic bidder recognising that the rate is stable and they do not have to pay over the odds.
And on the SMEs auction, the highest bid also fell to $85 from $86 last week, although the lowest successful bid was slightly up at $80 from $79 last week.
Total bids on the SMEs board increased to 152 from 148, although 9 bidders were unsuccessful over paperwork problems.
The SME auction saw a record total allotment of US$1,844 million driving the total allotted on both auction to a record of US$31,7 million. This was up from US$28 million last week.
The productive sectors continue to dominate the auction system, with latest figures showing that raw materials accounted for the bulk of allotments yesterday at US$12,54 million on the main auction and US$413 913 on the SMEs section.
Machinery and equipment came in second with US$4,63 million on the main and US$377 174 on the SMEs section.
And consumables came in third on the main auction at US$2,68 million, but on the SMEs section, consumables took up the bulk of allotments at US$556 338.
Consumables are things like spare parts and the like, and the SME auction has allowed a lot of specialised businesses in the SME sector who maintain and service equipment to use the auctions rather than having to send runners to Johannesburg, cutting their costs as well as ensuring they can give more reliable service to their customers.