Franc could be stabilising as it firms up against dollar

Tuesday April 18 2017

An attendant counts dollar notes at a forex bureau in Kigali.

An attendant counts dollar notes at a forex bureau in Kigali. The franc is getting stronger against the dollar. PHOTO | FILE 

By KABONA ESIARA

The Franc has continued firming up against the dollar depreciating by 0.82 per cent from January to March compared with 2.8 per cent in a similar period last year, raising hope that the currency is stabilising after a bad run in 2016.

The improving commodity prices, continued intervention from central bank and the narrowing trade balance have helped prop up the franc from the free fall against the green back.

The central bank has also allowed market forces to drive the exchange rate, projecting the franc to depreciate by four per cent this year.

Forex dealers in the country have started seeing the direction the franc is taking as it slowly gains against the dollar.

“The franc is getting stronger against the dollar. Ten days ago forex bureaus were trading the dollar at Rwf843. Today it is trading at Rwf841,” Riaz Naghoor, the country manager of UAE Exchange Rwanda told this paper.

The average trading rate quoted by National Bank of Rwanda as of April 11 was Rwf826.6 for each dollar.

The central bank has been in the market selling unspecified amounts of dollars to commercial banks, with the aim of boosting dollar supply and draining francs from the market.

Analysts say it appears that the regulator does not want a repeat of last years’ experience where the franc depreciated to its lowest level reaching 9.7 per cent in December compared with 7.6 per cent in 2015.

While the exact amount of dollars that the National Bank of Rwanda has sold to commercial banks between January to March has not been made public, it is understood that the financial sector regulator has continued to intervene.

From January to December 2016, $327.5 million (Rwf258.3 billion) was sold to commercial banks compared with $273.5 million (Rwf197.4 billion) sold in 2015.

Last year, the franc depreciated by 9.7 per cent registered in 2016 as pressure piled on the local currency and forex reserve levels dropped as the import bill ballooned. The central bank was forced to ration supply of dollars, which hurt the interests of firms seeking to utilise and remit dollars overseas.