Zimbabwe’s currency devaluation last week has led to a more realistic
exchange rate, yet thin trading implies the new official interbank
market isn’t as free as officials suggested.
The central bank announced on February 20 that its quasi-currencies -
bond notes and their electronic equivalent - would no longer be valued
at parity to the dollar and would be traded on an official interbank
market.
Since then, the bond notes, now known as RTGS dollars, have weakened
to 2.5 against the greenback, while the black market rate has
appreciated almost 9% to 3.36 per dollar, according to
marketwatch.co.zw, a website run by financial analysts in Harare.
The
tight trading band on the interbank market - rates have ranged between
2.5001 to 2.5042 this week - indicates trading isn’t totally free. The
RBZ seems to be the only supplier of dollars, with just
$7.7m traded as of Thursday, a person familiar with the matter
said.
There’s also been some improvement, again modest, with equities.
The dollar squeeze roiled the stock market, with locals piling into
it to hedge against inflation, which is officially 57% but may be
as high as
270 percent, according to
Steve H. Hanke, a professor of applied economics at Johns Hopkins
University in Baltimore. That caused foreign investors such as Cape
Town-based Allan Gray - which struggle to get their money out of
the country because of capital controls - to write down their holdings
to more realistic levels.
They measure how out of whack prices are by
taking the difference between the Harare and London shares of Old Mutual, Africa’s largest insurer.
The Harare stock has sunk 18% this week to
$7.50, which in Zimbabwe’s skewed markets is a sign that the liquidity
crisis is easing. It’s now 4.5 times the price of that in London, when
converted to dollars, down from 6.3 in January.
Investors won’t be confident the foreign-exchange crisis is over
until Zimbabwe’s formal and informal currency rates and the so-called
Old Mutual implied rate all converge.