Herald Reporter
The Zimbabwe dollar continued to appreciate in value in the whole auction of US dollars for bankers on Thursday, the second wholesale auction of the week, with the weighted average price of a US dollar falling to $4 537,4909, a drop of 4,9 percent on the Tuesday auction price.
Retailers are allowed to place a 10 percent premium on the exchange rate, and yesterday retailers were using $4 981,24 as their “till rate”, the first time since June 7 that this has been below $5 000.
The US dollar has now fallen in price by 34,7 percent since the peak price of almost $7 000 but while the prices of some products and some brands have fallen, a fall of more than a third is exceptionally rare.
In yesterday’s auction 11 of the 19 banks bought US$5 705 700 for prices ranging from $4 450 to $4 711,74. Another two banks wanting to buy US$777 800 had their bids rejected for being two below the clump of bids from the other 11 banks that placed a bid. These two lowest bids were not rejected because of lack of US dollars. Once again the Ministry of Finance and Economic Planning had made US$20 million available, the left overs from Tuesday topped up with the US$11,6 million sold on Tuesday.
At the moment the exchange rate is dropping because the sum of the banks’s bids, even those that cannot be allotted, are well below the amount of foreign currency in the pool on offer. This sees continued erosion in the price of a US dollar as bank bid lower at ech auction.
While the bottom accepted price had only drifted down by $50 from the Tuesday auction’s lowest price of $4 500, the top bid came down sharply by almost $200 to $4 711 from the $4 900 most expensive US dollar on Monday. It was this drop in the highest price paid that caused most of the sharp drop in the price of a US dollar between the two auctions.
But the 5,9 percent difference between the top and bottom prices paid is easily the lowest of the 12 auctions since the wholesale auctions for banks started on June 7.
At the moment banks are providing almost all the foreign currency that their business customers require over and above what they earn themselves through exports of customers making direct purchase using US dollars. The retail auctions on Tuesdays open to major importers is now almost a trivial event, selling around $500 000, a tenth of what these importers could buy.
With banks now the driving force in the foreign exchange markets they are setting the exchange rate through what they bid in the wholesale auctions for US dollars and the prices they charge their customers when the sell those same dollars. Each bank uses a different set of buy and sell rates for foreign currency, but the weighted average is the interbank rate that all sectors except tor the banks use.
On the day after a wholesale auction the interbank rate the weighted auction average, but the banks still have to generate their buy and sell prices. This tends to make the margins higher on the interbank rates than normal dealing.
The only influence that the authorities now have on the exchange rate is how much they are willing to sell at any particular auction. Since the end of last month there has been a pool of US$20 million available, which is significantly more than the banks are able to buy.
During the 12 wholesale auctions held so far, with the first on June 7, the banks have bought US$93,645 million for onward sale to their customers.