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The Tanzanian Shilling Losses 03% against the USD in August as

By Judy Weaver,2014-11-22 13:50
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The Tanzanian Shilling Losses 03% against the USD in August as

    The Tanzanian Shilling Losses 0.3% against

     the USD in August as Supply Drops by 20%

     Kareem Capital

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     Data Source: Bank of Tanzania Interbank Foreign Exchange Market Data

    According to the Bank of Tanzania data on the interbank FX market, turnover was depressed by 19.9% during August 2008

    compared to the previous month. A total of USD 100.25 million was traded in the market compared to USD 125.14 million

    traded in July. The 30-day moving average cut the spot market

    price curve in August in an attempt to reverse the Tanzanian

    Shilling’s appreciation trend against the greenback. However,

    the Tanzanian Shilling showed resistance and the trend in

     August begun to move sideways.

     Volatilities on TZS/USD FX spot market (the high-low spread as

    a percentage of the End of Day Weighted Average Rate) was

     relatively subdued in August as price action remained fairly

    irregular. Yet it is interesting to note that a number of weeks have passed and the exchange rate remains almost exactly

    unchanged on a weekly basis. The August moderation in volatilities suggests that price action may slow in the weeks

    ahead. Such conditions typically make intraday breakout

    strategies less profitable, while daily price movements may

    remain constrained. The 4-year data on the TZS/USD obtained

    from www.oanda.com shows that the TZS depreciates during

     the first half and appreciates during the second half of each

    year, suggesting a seasonal pattern. It is therefore anticipated that the TZS will resist depreciation until early in the fourth

    quarter of 2008 when it is expected to steadily depreciate until May to July 2009. The Tanzanian Shilling closed the month 30

    basis points lower at TZS 1,160.82 on 29 August 2008.

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    The recent moderation in intraday volatilities suggests

    that traders expect price action to slow in the weeks

    ahead. Given overall intraday volatility during the first

    quarter when market turnover was relatively low,

     intraday breakouts may prove worthwhile, but it seems

    as though price action may be stuck in the TZS 1,150.00 and TZS 1,170.00 range until we see further shifts in

    directional bias. The Tanzanian Shilling lost TZS 3.50 or 30 basis points of its value against the U.S. dollar in August.

     Data Source: www.oanda.com

     Turnover was 80.1% higher during the second quarter of 2008 in the interbank FX market to USD 355.8 million

    compared to USD 197.5 million during the first quarter. The huge spike in volume on the market made the

    Tanzanian Shilling stronger and it rallied against the

    greenback consistently with the 30-day average staying

    above the exchange rate curve. Intraday volatility was at

    its highest and between 50 and 250 basis points. Such

     higher volatility exists when the currency trend is

    predictable and traders are able to make positions with more certainty, providing huge chances profit.

     Data Source: www.oanda.com

     A total of USD 197.5 million was offloaded onto the FX

    market during the first quarter of 2008. The Tanzanian

     Shilling struggled to maintain resistance in the early weeks

    of 2008 and finally gave in to depreciation in March 2008 even though volume was up to USD 73.6 million compared

    to USD 65.3 million in the previous month. The market was cautious during the first quarter and intraday volatility

    remained lower despite witnessing a few occasions of

    higher spikes. Volume or supply of the USD on the market

     seems to be the underlying factor causing volatility as well

    as exchange rate movements.

     Data Source: www.oanda.com

     The fourth quarter of 2007 perhaps provides a mirror of what is to be expected during the fourth quarter of 2008. This is so because over the past four years, data shows that the exchange rate moves in similar patterns. Recently, the sideways trend in the Tanzanian Shilling against the

    greenback suggests that the pattern of the fourth quarter

    2007, 2005 and 2004 may occur in 2008. If this was to be

     the case, the market will notice that the Tanzanian Shilling

    will begin to steadily lose its gains in September or

     beginning the first month of the fourth quarter of 2008

    and continue to do so until May or June 2009.

     Data Source: www.oanda.com

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