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Zim currency sinks to new low
04/06/2006 17:38 - (SA)
Harare - Zimbabwe's battered local currency has sunk to new lows against the US dollar on the parallel market, reports said on Sunday.
The US dollar changes hands at a virtually-fixed rate of around Z$101 000 on the government's official market.
But much more hard currency is moved these days on the unofficial parallel market, where the exchange rates are now three times as high.
According to the state-controlled Sunday Mail newspaper, the US dollar is now trading hands at Z$310 000 per unit, a 100% slump. The privately-owned Standard said the rate was around Z$300 000 to the greenback.
"It is now feared that the wide rift between the formal and the parallel market rate will lead to arbitrage opportunities and speculative behaviour in the economy, a development that is highly inflationary," the Sunday Mail said.
Until now, official newspapers have mostly tried to ignore - or at least condemn - parallel foreign currency market activity. But Sunday's report may point to mounting pressure on Zimbabwe's central bank governor, Gideon Gono to let the official exchange rate slide.
The Standard said the Zimbabwe dollar's spectacular slide was partly attributable to heavy liquidity on the market.
E
conomist David Mupamhadzi told the paper that the dollar was falling "because most investors were shifting their portfolios from the money market to the foreign currency market."
As a result of the fall in value of the Zimbabwe dollar, the cost of fuel has now risen to around Z$300 000 per litre. Just two weeks ago, it was selling for around Z$200 000 a litre.
Exporters feel the pinch of Zimbabwe's two diverging exchange rates most. They have to bring their earnings in at the government's official exchange rate but then must buy supplies needed for production at prices normally determined by the parallel currency market.
Sapa-dpa
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