Currency Crisis

industrial and mining indices reached new all time highs.
The movement in the large caps has created headroom for the small and medium caps and thus there was some shuffling amongst the medium weights. The levels that were previously the resistance levels for the last half of the year such as $80,000 for Innscor, and $300,000 for Meikles, have swung into the support levels and this is an indicator of a bullish trend ahead. However, as the rumour of the possibility of the mid-term monetary policy review being presented this week intensified, there was some rampant buying.
Expectations are that the monetary policy review will maintain rates at current levels or possibly take a cut due to the money supply pressures that have emerged as a result of the high rates that were meant to deter speculative activities but ended up being the driver of inflation.
The exchange rate that has stagnated since January is expected to also come under the spotlight. We expect the exchange rate to be initially devalued to about $180,000 to the Greenback and then the thresholds set for a movement in the rate should be moved to reasonable levels of say US$2.5 million for a 2% movement.
This will be in line with the utterances made by the RBZ three months ago in Korea, when they expressed their intention to match the parallel market over the next 18 months. However this will have domino effects on down stream issues such as inflation and the capital requirements for banks.
Other measures in the review could include the increase in the gold buying price to about $10 million/g. Meanwhile we anticipate a supplementary budget of $200 trillion as the average inflation used in this year’s budget presented last year was a modest 300% and hence there has been a huge deficit.

Inflation slows down
HARARE – Zimbabwe’s annual inflation slowed down by a marginal 8.9 percentage points to 1 184.6 percent in the month of June, the government’s Central Statistical Office (CSO) said this week.  
Inflation, described by President Robert Mugabe as Zimbabwe’s enemy number one, was pegged at 1 193.5 percent in the previous month of May and still remains the highest such rate in the world.
According to the CSO, the latest inflation figures mean crisis-sapped Zimbabweans are paying 13 times more for the same basket of goods and services in June 2006 as they were paying in June 2005.
The government data office said month-on-month inflation had also moved downwards, shedding 10.7 percentage points to 17.3 percent from the May rate of 28 percent.  
In real terms, this means an average basket of goods and services for household final consumption that cost Z$100 000 in May would cost about $117 300 in June. – ZimOnline