Tight liquidity conditions and a shift towards a more liberalised wholesale auction saw the Zimbabwe dollar strengthen from $5 739.7961 at the beginning of July to $4 516.8025 at the end of the month with the parallel market rate falling to a seven-week low.
IH Securities says a combination of fiscal measures to stimulate demand for the local currency and stringent monetary contractionary measures yielded some positive developments within the month of July.
Month-on-month took a disinflation path at -15.3% down from 74.5% in June whilst annual inflation fell from 175.82% to 101.24%.
“On the wholesale auction, banks bid for about US$30.36 million against available funds of US$80 million,” it said.
IH Securities said while no new measures were announced in July, the central bank’s Monetary Policy Committee said it will maintain the current tight monetary policy stance whilst remaining on guard for any potential shocks that will derail the targeted 5.3% economic growth.
“In our view, exchange stability largely hinges on authorities keeping a lid on money supply. Activity on the Zimbabwe Stock Exchange was inadvertently affected by the Zimbabwe dollar liquidity crunch with value traded falling 51% m-o-m to $40.84 billion,” it said.
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