ZIMBABWE’S defenceless dollar this week plumbed fresh depths on the parallel market as buyers scrambled to park their funds in foreign currency on
the back of a grim inflationary outlook.
Dealers said even after suffering massive losses over the past few weeks, the Zimbabwe dollar was still battling to find a bottom due to escalating demand from both institutional buyers and individuals trying to escape inflation-induced losses on local currency holdings.
The local unit, which traded on the thriving parallel market at a rate of $900 to the greenback last week, was by yesterday selling for $1 500: US$1 for large volume transactions, with small transactions attracting a rate of between $1 200 and $1 300 per US dollar.
Other currencies, mainly the Euro, the British pound and the South African rand, were moving around the benchmark US dollar rate.
The Zimbabwe dollar traded at $100 000 (or $100 under the new currency system) per US dollar on the parallel market at the beginning of the year, from between $95 000/$96 000 per greenback at the close of 2005.
Parallel market dealers said the currency had been moving daily during the week in line with mounting demand.
They indicated that supply was being limited by fears on the part of the seller that they would sell short in a rapidly moving market.
An International Monetary Fund (IMF) forecast putting inflation at an average 1 200% this year, and 4 279% next year had sparked heavy buying on the parallel market as both individuals and institutions sought to hedge themselves against inflation, market analysts said.
Inflation last month touched an all-time high of 1 204,6% year-on-year, and there are indications it could swell to record levels in the coming months.
The hyperinflationary cycle has made it unattractive to hold the local currency when costs for goods and services go up almost everyday.
This has meant that rather than saving, people are now making sure they spend their little incomes as fast as they can, on goods.
Analysts predict a pronounced flight from the domestic currency as a store of value by people holding cash shifting their wealth into hard currency or durable goods.