(Bloomberg) -- Zimbabwe’s foreign-currency reserves have risen to $509 million as companies liquidate their foreign-currency positions, creating demand for the local unit, the state-run Sunday Mail cited Reserve Bank of Zimbabwe Governor John Mushayavanhu as saying.
The firming of the local currency, known as the ZiG, was also due to the central bank increasing its benchmark interest rates in September to 35% from 20%, Mushayavanhu told the Harare-based paper. Last week the ZiG notched up its first weekly gain since a devaluation in late September, rising to 25.60 against the dollar.
“Tight ZiG liquidity conditions amid a tight monetary policy stance in the market have increased willingness by economic agents to liquidate their foreign currency positions,” Mushayavanhu said. “These conditions have largely contributed to the appreciation of the currency.”
As of Nov. 6, local currency reserves stood at about ZiG 3.4 billion ($129 million), compared with foreign-currency reserves of $509 million, he said.
The ZiG, which began operating in April and is backed by the southern African nation’s gold and hard currency reserves, is the country’s sixth attempt in 15 years to create a stable local currency to replace the dollar as the main unit of exchange.
The ZiG was devalued by 43% against the dollar in September at the same time as interest rates were raised. That led to a jump in October’s monthly inflation rate to 37.2% from 5.8% in September.
--With assistance from Desmond Kumbuka.
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