US dollar trades at 57.36 on 1st day of market based auction system

THE official exchange rate of the US dollar is now 57.36 following the implementation of the market-based auction system. 92 bids were received with the lowest bid being 25.50 and the highest bid being 100.00 which were subsequently weighted and averaged to get 57.36. This exchange rate will be effective up to next week Tuesday when another auction will be done.
Reserve Bank of Zimbabwe Governor, Dr John Mangudya said the initial market based foreign currency auction system was transparently done with various stakeholders in the financial sector observing the process, he also indicated that a total value of US 11.4 million was underbid however 81 bids were successful to give a total value of US 10.35 Million allotted which gives 91 percent success rate.
Of the US 10.35 million allotted, raw materials accounted for US 2.9 million, machinery and equipment US 2.4 million, food and beverages US 1.4 million, fuel, electricity and gas were allocated US 263 147.46 thousand.
Dr Mangudya also highlighted that he expects the exchange rate to find its long-run equilibrium point after a couple of auctions.
Furthermore, he emphasised that through this market based foreign exchange rate determination system, he is optimistic that a number of arbitrage opportunities and rent-seeking behaviours that had become troublesome in the fuel subsector will disappear.
The new foreign exchange rate determination system is also expected to deal with some prevalent economic practices like forward pricing that was detrimental to the well-being of the Zimbabwean economy.
The new auction system, according to the central bank chief will also bring smiles to exporters and in particular tobacco farmers and gold producers as they will now be getting a fair value on their hard-earned foreign exchange as they had previously complained that the fixed exchange regime of $25 was driving them out of business as they were surrendering their forex at a discount which was highly unsustainable to their operations.
As the new system continues to be in operation, expectations are high that the economy is going to witness a sustainable price discovery process that will give stability to the economy and set it on a development trajectory.