Tobacco auctions could move exchange rate for Zimbabwe's transitional currency: central bank governor

[March 11, 2019]  HARARE (Reuters) - Zimbabwe's central bank governor on Monday said the exchange rate for the new transitional currency should move from 2.5 to the U.S. dollar by the time tobacco auctions open next week, suggesting the local unit will be devalued further.

The Reserve Bank scrapped a discredited 1:1 dollar peg for surrogate bond notes and electronic dollars last month, merging them into a lower-value transitional currency called the RTGS dollar, which has been stuck at a rate of 2.5 to the greenback.

John Mangudya said an average $12 million had been traded every week at the new forex interbank rate since Feb. 22 when banks started selling dollars to large corporates.

Mangudya told a parliamentary committee that the rate would not remain the same when auctions for tobacco, which brings the second largest foreign earnings after mining, open on March 20.

"We do believe that before or on that date the rate will have reached its equilibrium. We don't believe it (exchange rate) will still be 2.5 (to the U.S. dollar)," Mangudya said.

Those holding dollars have been reluctant to sell their money saying the 2.5 rate was too low. On the black market on Monday, US$1 bought 3.8 RTGS dollars.

(Reporting by MacDonald Dzirutwe; Editing by Toby Chopra)

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