The Zimbabwe dollar weakened to ZWL$4,868 against the United States dollar as the central bank began yesterday selling foreign currency to banks at market determined exchange rate in a bid to shore up the interbank market.
The Reserve Bank of Zimbabwe (RBZ) announced on Tuesday that it would sell foreign currency at the market-determined exchange rate through banks to support and strengthen the foreign exchange interbank market. Banks will in turn sell to its customers.
The highest bid at yesterday’s wholesale auction was ZWL$5,020.0000 while the lowest was ZWL$4,500.0000.
Amount allotted was US$11,180,000.00. Of the 19 bids received from banks, 10 were allotted.
RBZ governor John Mangudya said on Tuesday the sale of foreign currency at market determined exchange rate through banks seeks to ensure that the interbank forex market becomes the primary source for foreign exchange needs in the economy.
This comes as the local currency has been depreciating sharply against the dollar resulting in a rise in annual inflation.
Annual inflation, which has been heading south over the months, bucked the trend in May, rising to 86.5% from 75.2% in April.
RBZ removed the 90-day liquidation requirement on export proceeds to ensure that the interbank forex market is “self-financing”.
The interbank maximum trading limit was raised four-folds to US$500,000 from US$100,000.
The main and MSME auctions would be merged under the US$5m per week policy, with bid limits of a minimum of US$1 500 and a maximum of US$50,000.
The measures announced on Tuesday come after interventions by the Treasury which ended the central bank’s quasi-fiscal activities in a bid to contain money supply growth, blamed for the weakening of the local currency.
It also comes as the US$ is trading above ZWL$5000 on the parallel market against the ZWL$3,673.7718 on the auction market.