- Zimbabwe Ends Decade of Dollarisation in New Currency Reform
Zimbabwe made its interim currency the country’s sole legal tender on Monday, ending a decade of dollarisation and taking a another step towards relaunching the Zimbabwean dollar.
The central bank also hiked its overnight lending rate to 50% from 15% as a part of a set of measures to protect the RTGS dollar introduced in February.
“The march towards full currency reform is part of our transitional stabilisation programme,” Finance Minister Mthuli Ncube said in a video posted on Twitter.
“This move is really beginning to restore full monetary policy.”
Zimbabwean President Emmerson Mnangagwa, who replaced longtime leader Robert Mugabe after an army coup in November 2017, is trying to repair an economy ruined by hyperinflation and a long succession of failed economic interventions.
But a hoped-for economic turnaround is yet to materialise, and many Zimbabweans are distrustful of Mnangagwa’s promises.
Mnangagwa’s government last month agreed a staff-monitored programme with the International Monetary Fund (IMF) whereby the fund will help Zimbabwe implement coherent economic policies.
Analysts are sceptical that the latest currency reforms will be a quick fix for the deep problems that have constrained economic growth in the southern African country.
“Zimbabwe will have to show results before people are convinced,” said Jee-A Van Der Linde, an economist at South Africa-based NKC African Economics.
Van Der Linde said banning the use of currencies such as the U.S. dollar and South African rand could create panic since Zimbabwe did not have large foreign-currency reserves to back the RTGS dollar.
There was nothing standing in the way of the Zimbabwean central bank printing money as it had done in the past, he added.
The central bank said in a statement on Monday that it had put in place letters of credit worth $330 million to secure imports for important goods such as fuel.
It would also try to boost liquidity on the interbank forex market by removing a cap on margins for banks and making sure that more than 50% of the foreign currency that Zimbabwean companies have to surrender ends up on the interbank market.
Zimbabwe abandoned its own dollar in 2009 after years of hyperinflation had destroyed trust in the local unit.
Mnangagwa said this month that Zimbabwe must reintroduce its own currency by the end of the year.
The IMF has said Zimbabwe should quickly allow the RTGS dollar to float freely, allow exporters to sell dollars at the interbank rate rather than surrender them to the central bank, and raise interest rates to curb inflation.
The RTGS dollar has been hitting new lows on the black market in recent days.
It was trading between 11 and 12 against the U.S. dollar on the unofficial market on Monday versus a level of around 6 on the official interbank market.
Many Zimbabweans complain that goods and services are still priced in other currencies.
While more than 80% of Zimbabweans earn RTGS dollars, goods ranging from bricks to groceries have their prices pegged in U.S. dollars.
Inflation raced to 97.85% in May, eroding salaries and savings and causing Zimbabweans to fear a return to the hyperinflation era a decade ago.
Global Markets Near Record Peaks and Will Get Stronger: deVere CEO
As the FTSE 100 hits 7,000 points for the first time since the Covid pandemic, global stock markets are poised to “get even stronger”, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.
The observation from Nigel Green, the chief executive and founder of deVere Group, comes as London’s index jumped over the important threshold in early trading in London, gaining over 0.5% to 7024 points.
Mr Green notes: “London’s blue-chip index is up 40% since the worst lows of the pandemic.
“This landmark moment represents the wider optimistic sentiment gripping global markets which are near record peaks.
“We can expect global stock markets to get even stronger as investors look to seize the opportunities from economies reopening.
“They are looking towards economies rebounding in a post-pandemic era due to the monetary and fiscal stimulus, pent-up cash and demand, and strong corporate earnings.
“The current ultra-low interest rate environment and the under-performance of bonds will also act as a catalyst for stock markets.”
However, the CEO’s bullish comments also come with a warning.
“I would urge investors to proceed with caution as there are some headwinds on the horizon, including relations between the U.S. and China, the world’s two largest economies, which could be coming to a tipping point in coming weeks.
“As such, in order to capitalise on the opportunities and mitigate risks, investors must ensure proper portfolio diversification.”
Mr Green concludes: “A variety of factors are going to drive global stock markets. Investors will not want to miss out and should work with a good fund manager to judiciously top-up their portfolios.”
Refinitiv Expands Economic Data Coverage Across Africa
Building on its commitment to drive positive change through its data and insights, Refinitiv today announced the expansion of its economic data coverage of Africa. The new data set allows investment managers, central bankers, economists, and research teams to use Refinitiv Datasteam analytical data for detailed exploration of economic relationships and investment opportunities among data series covering the African continent.
Securing reliable, detailed, timely, locally sourced content has not been easy for economists who have in the past had to use international sources which often can take many months to update and opportunities to monitor the market can be missed. Because Africa is a diverse continent, economists and strategists need more timely access to country-specific data via national sources to create tailored business, policy, trading and investment strategies to meet specific goals.
Africa continues to develop critical infrastructure, telecommunications, digital technology and access to financial services for its 1.3bn people. The World Bank estimates that over 50% of African inhabitants will be under 25 by 2050. This presents substantial opportunities for investors who can spot important trends and make informed decisions based on robust and timely economic data.
Stuart Brown, Group Head of Enterprise Data Solutions, Refinitiv, said: “Africa’s growing, dynamic and fast evolving economies makes it a focal point for financial markets today and in the coming decades. As part of LSEG’s commitment to empowering the global markets with accurate and timely data, we are excited about making these unique datasets available via the Refinitiv Data Platform. Our economic data coverage of Africa will provide our customers with deeper and broader inputs for macroeconomic analyses and enable more effective investment strategies and economic research.”
Refinitiv Africa economic data coverage:
- Africa economics content comprises around 500,000 nationally sourced time series data covering 54 African nations
- Content is sourced from national statistical offices, central banks and other key national institutions
- The full breadth of economics categories in Datastream including national accounts, money and finance, prices, surveys, labor market, consumer, industry, government and external sectors
- International sources including OECD, World Bank, IMF, African Development Bank, Oxford Economics & more provide comparable data & forecasts across the continent
Refinitiv® Datastream® has global macroeconomics coverage to analyze virtually any macro environment, and better understand economic cycles to uncover trends and forecast market conditions. With over 14.2 million economic times series map trends, customers can validate ideas and identify opportunities using Refinitiv Datastream. Access its powerful charting tools, 9,000 pre-built chart templates and chart studies for commonly used valuation, performance, and technical and fundamental analysis.
Refinitiv continually grows available data – the China expansion in 2019 covered a unique combination of economic and financial indicators. Refinitiv plans to expand Southeast Asia covering Thailand, Vietnam, Philippines and Malaysia with delivery expected in 2021. This ensures that Refinitiv will have much needed emerging market economic content.
Oil Rises on Drawdown in U.S. Oil Stocks, OPEC Demand Outlook
Oil prices rose in early trade on Wednesday, adding to overnight gains, after industry data showed U.S. oil inventories declined more than expected and OPEC raised its outlook for oil demand.
Brent crude futures rose 28 cents, or 0.4%, to $63.95 a barrel at 0057 GMT, after climbing 39 cents on Tuesday.
U.S. West Texas Intermediate (WTI) crude futures similarly climbed 28 cents, or 0.5%, to $60.46 a barrel, adding to Tuesday’s rise of 48 cents.
Oil price gains over the past week have been underpinned by signs of a strong economic recovery in China and the United States, but have been capped by concerns over stalled vaccine rollouts worldwide and soaring COVID-19 infections in India and Brazil.
Nevertheless, the Organization of the Petroleum Exporting Countries (OPEC) tweaked up its forecast on Tuesday for world oil demand growth this year, now expecting demand to rise by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. It is banking on the pandemic to subside and travel curbs to be eased.
“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.
Further supporting the market on Wednesday, sources said data from the American Petroleum Institute showed crude stocks fell by 3.6 million barrels in the week ended April 9, compared with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.
Traders are waiting to see if official inventory data from the U.S. Energy Information Administration (EIA) on Wednesday matches that view.
Market gains are being capped on concerns about increased oil production in the United States and rising supply from Iran at a time when OPEC and its allies, together called OPEC+, are set to bring on more supply from May.
“They may have to contend with rising U.S. supply,” ANZ analysts said.
EIA said this week oil output from seven major shale formations is expected to rise by 13,000 bpd in May to 7.61 million bpd.
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