October 28, 2011 / 12:53 PM / 6 years ago

Tanzania shilling jumps after c.bank pumps in dollars

DAR ES SALAAM (Reuters) - The Tanzanian shilling bounced off record lows against the dollar on Friday after the central bank pumped in dollars, traders said.

Commercial banks quoted the shilling at 1,640/1,650 in the afternoon part of the session, up from 1,815/1,825 at Thursday’s close.

“The central bank has entered the market strongly this time to support the shilling. This has helped to assure the market and encouraged other players to offload their dollars,” Alex Ngusaru, head of treasury at CRDB Bank, told Reuters.

“Confidence has been restored in the market after the central bank showed that it was serious in enforcing measures aimed at supporting the shilling.”

Although Bank of Tanzania (BOT) is traditionally the main supplier of foreign currency in the market, it had hitherto not escalated intervention measures in favour of the shilling, even as the shilling hit one record low after the other.

Traders said they expected the shilling to trade below the 1,700 level next week after the central bank’s aggressive intervention.

“We opened at 1,853 this morning, by mid-afternoon we reached 1,740/1,750, and we are now closing at 1,640/1,650,” said Cleopa Dickson, a trader at Bank of Africa, Tanzania.

“The central bank is sending strong signals in the market that it wants the currency to return to below 1,700 levels and we think that is what will happen from Monday next week.”

Traders said a new central bank directive that lowered the maximum net open position limit for banks from 20 percent to 10 percent would lead to a strengthening of the shilling in the days ahead because it would force banks to offload their dollars.

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