Zimbabwe ZiG Currency Rally Enters 3rd Day, Adds 0.4% vs Dollar

Ray Ndlovu, Bloomberg News

ZiG banknotes.

, Bloomberg

(Bloomberg) -- Zimbabwe’s new currency the ZiG continued to strengthen against the dollar as more companies switched their payment systems to the unit.

About 20 of the nation’s 27 financial institutions have made the shift to be able to process electronic payments in ZiG, according to national payments platform ZimSwitch. The Zimbabwe Electricity Supply Authority also said it had migrated payments to the ZiG, the southern African nation’s latest effort to create a functioning local currency.

The unit was trading at 13.45 per dollar on Thursday, according to data posted on the Reserve Bank of Zimbabwe website. That represents its biggest single-day advance against the greenback since it was launched on Monday and take its cumulative advance to 0.8%.

The gains represent a modest break from the past. Its predecessor, the Zimbabwe dollar, had lost value against the US dollar every single trading day of this year until it was scrapped on April 5. On its demise, it had lost 80% of value, making it the world’s second worst performing currency after the Lebanese pound.

Read More: Zimbabwe’s ZiG Mirrors Gold’s Gain as Banks Struggle to Switch

The ZiG — short for Zimbabwe Gold — is backed by 2.5 tons of bullion and about $100 million in foreign currency held by the central bank.

Treasury said it is weighing combining its own $300 million reserves together with the central bank’s holdings to help boost the currency, Secretary for Finance and Economic Development George Guvamatanga told an event in the capital, Harare, on Monday.

Authorities have linked the ZiG to the price of gold in an attempt to reduce volatility. A single ZiG is worth about 7 US cents, the price of a milligram of gold. The central bank said it will use the differential between local inflation rates calculated using both the Zimbabwe and US dollars, and the movement in the price of a basket of precious minerals held as reserves to fix the ZiG rate.

(Updates with banks processing new currency from second paragraph and adds details throughout)