The Zimbabwe Currency Alternative Market- January Trends

The Zimbabwe Currency Alternative Market- January Trends

RTGS/USD Trend The alternative market was less volatile in the month of January with the RTGS/USD rate averaging a premium of 255% ($3.55) over the 30-day period. From the 1st to the 18th of January 2019, the RTGS/USD Trend was averaging a premium of 234% ($3.34). The trend however took an upward swing around the 19th of January 2019 reacting to the Civil disturbances witnessed after a 150% increase in the fuel pump price. Bond/USD Trend The Bond/USD trend was also stable over the period and traded at an average of 234%($3.34) over the month of January 2019. The trend was however more stable in the first half of the month in which it was averaging 215% ($3.15) until the 18th of January 2019. Like the RTGS/USD Trend, the Bond/USD rate also reacted negatively to the disturbances witnessed around mid-January and the premium increased to an average of 255% ($3.55) and closed at 260% ($3.60) as at end of January 2019.

Zimbabwe Financial Analysis

RTGS/Bond The RTGS/Bond was the more stable of the alternative market rates combinations at 15% over the period under review. The premium is reflective of the premium that cash holders continue to place on their bond notes holdings compared to the RTGS Balances. Old Mutual Implied Rate (OMIR) The OMIR was relatively unstable compared to other rates combinations. The average OMIR premium for the month was 398% ($4.98). However, the rate was less volatile in the first half of the month in which it averaged 363% ($4.63). The OMIR hit its highest on the 23rd of January 2019 when it reached 527%($6.27). The average rate for the second half of the month was 448%($5.48).

Outlook In the outlook period much will depend on the scope and extent of currency reforms which everyone expects the pending Monetary Policy to address. If the currency is allowed to float and businesses authorised to trade forex on the open market, we anticipate a much more orderly and defined market which should eliminate speculative tendencies and arbitrage in the market. With the inflation outlook looking gloomy, there is an anticipation that the Old Mutual Implied Rate (OMIR) is likely to increase on the back of a bull run on the ZSE as investors prefer to buy shares in order to protect value.