THE Zim dollar tumbled by 43% on the Reserve Bank of Zimbabwe (RBZ) Foreign Exchange Auction market effectively closing the parallel market gap which had become a source for market arbitrage in recent weeks.
A trading update released at the close of trading Tuesday shows that the official exchange rate hit US$1:ZW$3 673 to signify a 42,5% decrease in just one week.
A fortnight ago, the exchange rate depreciated to US$1: ZWL 1 888 down from US$1: ZWL1 404 signifying a 34% decrease inside just one week.
Three weeks ago, the ZW$ recorded another 14% fall recorded over and above the 36,4% decline recorded last week which saw the exchange rate weakening to US$1:ZW$2 577.
This follows a series of measures by Finance Minister Mthuli Ncube aimed at stabilising the ailing local currency.
The parallel market rate is hovering around US$1:ZW$ 4 000 with US$1: ZW$3 500 being the readily available premium.
Retail outlets are reportedly demanding higher premiums as they hedge through forward pricing to protect their stocks against future uncertainties.
Analysing the weekly trends on the official market, economist Prosper Chitambara said the current rates indicate improvements in the RBZ Auction efficiencies amid calls for increased discipline on the money supply side as a lasting solution.
“What we have witnessed recently indicates some improvements in the manner in which the RBZ Auction is operating. The past conservative trends have been eliminated as witnessed by the rapid depreciation of the exchange rates in recent weeks.
“This is a step in the right direction because it contributes immensely towards the eradication of arbitrage opportunities and is a self-correcting exercise to address distortions in the market. It also has some stabilising effect on rent seeking behaviour,” he said.
Chitambara however warned that there is still an urgent need for authorities to walk the talk on money supply, hinting that if that does not change the perceived gains will be reversed quickly.
Meanwhile, allotments on the auction sustained a productivity inclined slant with raw materials, machinery and equipment enjoying a huge proportion of the total US$4,9 million allotted on the Main and SMEs platforms.