Connect with us

Markets

Zimbabwe Ends Decade of Dollarisation in New Currency Reform

Published

on

  • 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.

INFLATION

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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Crude Oil

Nigeria’s Crude Oil Production Falls for Second Consecutive Month, OPEC Reports

Published

on

Crude Oil

Nigeria’s crude oil production declined for the second consecutive month in March, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

Data obtained from OPEC’s Monthly Oil Market Report for April 2024 reveals that Nigeria’s crude oil production depreciated from 1.322 million barrels per day (mbpd) in February to 1.231 mbpd in March.

This decline underscores the challenges faced by Africa’s largest oil-producing nation in maintaining consistent output levels.

Despite efforts to stabilize production, Nigeria has struggled to curb the impact of oil theft and pipeline vandalism, which continue to plague the industry.

The theft and sabotage of oil infrastructure have resulted in significant disruptions, contributing to the decline in crude oil production observed in recent months.

The Nigerian National Petroleum Company Limited (NNPCL) recently disclosed alarming statistics regarding oil theft incidents in the country.

According to reports, the NNPCL recorded 155 oil theft incidents within a single week, these incidents included illegal pipeline connections, refinery operations, vessel infractions, and oil spills, among others.

The persistent menace of oil theft poses a considerable threat to Nigeria’s economy and its position as a key player in the global oil market.

The illicit activities not only lead to revenue losses for the government but also disrupt the operations of oil companies and undermine investor confidence in the sector.

In response to the escalating problem, the Nigerian government has intensified efforts to combat oil theft and vandalism.

However, addressing these challenges requires a multi-faceted approach, including enhanced security measures, regulatory reforms, and community engagement initiatives.

Continue Reading

Crude Oil

Oil Prices Edge Higher Amidst Fear of Middle East Conflict

Published

on

Crude Oil

Amidst growing apprehensions of a potential conflict in the Middle East, oil prices have inched higher as investors anticipate a strike from Iran.

The specter of a showdown between Iran or its proxies and Israel has sent tremors across the oil market as traders brace for possible supply disruptions in the region.

Brent crude oil climbed above the $90 price level following a 1.1% gain on Wednesday while West Texas Intermediate (WTI) hovered near $86.

The anticipation of a strike, believed to be imminent by the United States and its allies, has cast a shadow over market sentiment. Such an escalation would follow Iran’s recent threat to retaliate against Israel for an attack on a diplomatic compound in Syria.

The trajectory of oil prices this year has been heavily influenced by geopolitical tensions and supply dynamics. Geopolitical unrest, coupled with ongoing OPEC+ supply cuts, has propelled oil prices nearly 18% higher since the beginning of the year.

However, this upward momentum is tempered by concerns such as swelling US crude stockpiles, now at their highest since July, and the impact of a hot US inflation print on Federal Reserve rate-cut expectations.

Despite the bullish sentiment prevailing among many of the world’s top traders and Wall Street banks, with some envisioning a return to $100 for the global benchmark, caution lingers.

Macquarie Group has cautioned that Brent could enter a bear market in the second half of the year if geopolitical events fail to materialize into actual supply disruptions.

“The current geopolitical environment continues to provide support to oil prices,” remarked Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, he added, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”

The rhetoric from Iran’s Supreme Leader, Ayatollah Ali Khamenei, reaffirming a vow to retaliate against Israel, has only heightened tensions in the region.

Continue Reading

Commodities

Geopolitical Uncertainty Drives Gold Prices Higher Despite Fed Rate Cut Concerns

Published

on

gold bars - Investors King

As tensions simmer in the Middle East and concerns loom over Federal Reserve policy, gold continues its upward trajectory, defying expectations and reinforcing its status as the ultimate safe-haven asset.

The latest surge in gold prices comes amidst escalating geopolitical tensions in the Middle East.

Reports suggest that the United States and its allies are bracing for potential missile or drone strikes by Iran or its proxies on military and government targets in Israel. Such a significant escalation in the six-month-old conflict has sent shockwaves through financial markets, prompting investors to seek refuge in gold.

Despite initial setbacks earlier in the week, gold resumed its blistering rally, buoyed by the specter of geopolitical uncertainty.

On Wednesday, the precious metal witnessed its most significant decline in almost a month following a hotter-than-expected US inflation readout.

This unexpected data led traders to recalibrate their expectations for Federal Reserve interest rate cuts this year, causing the yield on 10-year Treasuries to surge above 4.5%.

However, gold’s resilience in the face of shifting market dynamics remains remarkable. Even as concerns mount over the Fed’s rate-cutting trajectory, the allure of gold as a safe-haven asset persists.

Prices hover just shy of a record high reached earlier in the week, propelled by robust buying from central banks.

Market analysts interviewed by Bloomberg anticipate further gains in gold prices, citing continued geopolitical tensions and strong momentum in the market.

The precious metal’s near-20% rally since mid-February underscores its enduring appeal as a hedge against uncertainty and inflationary pressures.

At 9:54 a.m. in Singapore, spot gold rose 0.3% to $2,341.58 an ounce, signaling continued investor confidence in the metal’s resilience.

The Bloomberg Dollar Spot Index, meanwhile, remained relatively unchanged near its highest level since November.

Silver, often considered a bellwether for precious metals, held steady after reaching a three-year high, while platinum and palladium also registered gains.

As the world navigates through a complex web of geopolitical tensions and economic uncertainties, gold remains a beacon of stability in an increasingly volatile landscape.

Its ability to weather market fluctuations and maintain its allure as a safe-haven asset reaffirms its timeless appeal to investors seeking refuge amidst uncertainty.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending