East African Business Week

DAR ES SALAAM, TANZANIA - Things are looking up for the Tanzania shilling as it is expected to appreciate substantially against major currencies when large tax payers settle their annual obligations.
This is also happening just when the Bank of Tanzania (BoT) is adopting tighter measures on the expansion of liquidity.
During the month of December, when a lot of large businesses pay their taxes, the US dollar chases the shilling. Financial market analysts also note that December is low in terms of business as most of decision makers go on holiday and many companies put off foreign transactions.
Most import for consumer goods as the year comes to a close are done between October and November. The National Microfinance Bank treasury director, Mr. Aziz Chacha predicts the shilling will remain weaker in the coming days, but strengthen in December, especially with tight monetary policy deployed by the Central Bank.    
"We are anticipating low demand during December as some imports will be postponed, but come mid-January 2012 the pressure will pick up," Chacha said last week.
Last week, the shilling traded moderately fluctuating between single digits especially the last three days of last week, showing signs of stabilizing at Tsh1,770 against the US dollar in the foreign exchange market.
The local currency dropped to Tsh1,750 last week before climbing again due to high demand.
Standard Chartered Bank attributed the reason of flat trading on inflows both in the interbank and corporate markets.
"General sentiment remains with a view of the market remaining flat with low to moderate level of volatility," a daily market commentary from Standard Chartered Bank reads in part.
The BoT is implementing tight money policy to curb inflation by increasing the reserves of commercial banks and consequently reducing the money supply in the economy.