Zimbabwe’s second foreign currency auction, which held today, saw the local currency trading at an average of 63.7442 to the US dollar. At the first auction system, the Zimbabwe dollar debuted at 57 against 1 US dollar.
The auction system which is conducted every Tuesday, was designed to boost transparency and efficiency in the forex market. According to the results of the auction today, which were published by the central bank, amount available for auction today was US$16.32 million and the highest bid was at a rate of 92, whilst the lowest was at 37.82.
The weighted average rate of 63.74 which is now the official market rate until the next Tuesday’s auction. However, the new official exchange rate, remains below the parallel market rate which is ranging from 90 to 100 per US dollar depending on the method of payment.
The auction system will operate on the Reuters Forex Trading platform, a real-time electronic trading system. Under the foreign currency auction system, bids will be submitted to, allotted and evaluated by the Reserve Bank of Zimbabwe with the offers for foreign currency while bids from buyers are submitted each Tuesday.
Adoption of the new system, in place of a fixed rate, has been hailed as a step in the right direction in terms of bringing sanity in the markets. There have been calls for total independence of the auction system to ensure that the exchange rate reflects the true value of local currency.
In 2019, the southern African country reintroduced its local currency, after a decade of using the multicurrency regime which was largely dominated by use of the US dollar.