Dollar continues to slide

Shakeman Mugari

THE Zimbabwe dollar this week continued to slide on the parallel foreign exchange market against the world’s major currencies.



sans-serif”>The gap between the exchange rate on the parallel market and the Reserve Bank of Zimbabwe’s auction floors continues to widen despite central bank controls.


The parallel market is thriving, putting a damper on central bank efforts to keep exchange rates artificially stable.


This week the local currency fell to pre-auction levels of $7 000 against the US dollar and $1 300 against the strengthening South African rand.


Last week the dollar was trading at an average of $6 450 against the greenback and $1 100 versus the rand on the parallel market.


That is almost 33% more than the auction rate, which is currently hovering around $5 300 to US$1 – an indication the dollar is over-priced on the official market.


Although inflation has slowed down, the local currency continues to weaken against a backdrop of poor export returns.


Analysts say the auction floors are not based on basic market principles of demand and supply.


The Reserve Bank has continued to peg the dollar despite indications that the real exchange rate has gallopped.


Major players on the parallel market are travellers who are failing to secure foreign currency on the RBZ auction floors.


There are companies that are failing to get funds from official sources who are now surviving on the parallel market.


The analysts say the dollar is likely to be on the receiving end of the currency market unless the Reserve Bank pushes the rate to a “realistic and tradable level”.


There is also growing resistance among Zimbabweans in the diaspora who feel the auction rate is not giving them value for their foreign currency.