DAR ES SALAAM (Reuters) - The Tanzanian shilling weakened to an all-time low of 1,540 against the dollar on Friday as greenback demand from the energy sector piled pressure on the local currency.
At 0752 GMT, commercial banks quoted the shilling at 1,535/1,540 to the dollar, compared with 1,530/1,535 at Thursday’s close. The shilling is trading past the previous low of 1,527, hit in May 2010.
“The all-time depreciation of the shilling has been largely caused by demand from the oil sector. The ongoing shortage of electricity in the country has significantly pushed up demand for fuel for power generation,” said Hamisi Mwakibete, head of trading at Commercial Bank of Africa Tanzania.
“Oil companies also appear to have run low on stocks and are doing bulk importation of fuel, hence the strong demand for US dollars in the market. There is a pile up of demand from corporate customers at the moment,” he said.
Earlier this week, Tanzania’s state-run power company announced daily 16-hour power cuts for a week starting from Thursday due to an expected shortfall of up to 350 megawatts (MW) on the national grid.
Demand for dollars from oil importers has also contributed to declines in the Kenyan shilling this month.
Traders said the next level they were watching was 1,550. If breached, the focus would be on 1,600.
Traders attributed the weakening also to dollar buying by customers fearing that the shilling was going to lose even more ground in coming days.
“There is a sudden rush of demand caused by panic buying, where everyone wants to buy dollars at prevailing rates on the anticipation that the shilling will continue to weaken,” said Yono Mtengule, an economist at the National Bank of Commerce.
Traders said the shilling could get some reprieve towards the end of the month as companies sell off dollars to pay their shilling-denominated taxes.
“There might be a cooling effect next week because of the traditional dumping of dollars by corporates at month-end to fulfil government commitments,” Mtengule said.