MONETARY POLICY REVIEW: RBZ says intervening in forex market amid ZiG slump

By Bloomberg News

HARARE: Zimbabwe’s central bank said it’s “strategically intervening” in the foreign-exchange market to meet demand for dollars among lenders amid a slump in the nation’s bullion-backed currency.

The intervention is being done using 50% of the foreign-exchange proceeds that the central bank collects from exporters, Governor John Mushayavanhu said, without disclosing the amount.

The Reserve Bank will continue to participate in the foreign exchange market “to ensure operational flexibility within the supply and demand dynamics,” he said Friday in an emailed statement of the mid-term monetary policy.

In July, the central bank put $50 million in the foreign-exchange market to help meet a surge in demand for dollars and support its gold-backed unit, the ZiG, adopted in early April.

The ZiG, short for Zimbabwe Gold, is the nation’s sixth attempt at having a functioning local currency in 15 years. It is backed by gold, precious minerals and cash reserves. The currency weakened to 13.85 per dollar Friday — its lowest-level since launch.

Other Highlights:

• Central bank holds key interest rate at 20% and expects to achieve its inflation target of under 5% by year-end.
• Gold coins and gold-backed digital tokens, which were issued by the central bank, are being redeemed at the holder’s currency of choice. No new instruments are being issued.
• From September 1 electronic transactions of less than $10 or the ZiG equivalent will be exempt from bank charges.
• The usage of the new currency has increased, such that the real-time gross settlement values ratio between the US dollar and local currency is 61:39.