Kwacha free fall
According to market analysts, “pure onshore has continued to drive high demand for US dollars as market continued to experience a constant increase in corporate demand”.
According to Standard Chartered Bank, not even sizeable inflow from the mining and agriculture sectors earlier in the week were enough to compensate the bearish run of the kwacha.
“Kwacha marginally lost 10 points breaking above the K5,300 psychological barrier and closing at K5,315 to K5,395 for bid and offer. The move was purely onshore driven as market continued to experience constant increase in corporate demand despite receiving sizeable inflow from the mining and agriculture sectors earlier in the week,” stated Standard Chartered Bank.
“The market is also weary of selling interest above K5,300 so a retracement looks imminent.”
And Zanaco also attributed the kwacha’s depreciation to broad dollar strengthening against a basket of currencies and the persistent demand for the greenback on the local market that “has hitherto remained unquenched by the steady dollar inflows that have been coming to the market”.
“In the near term the kwacha is expected to trade range bound between K5,250 and K5,350 for bid and offer on the interbank market with a bias to weaken further,” stated Zanaco.
The local currency has come under pressure in the last six months.
The kwacha’s weakness has been attributed to the prolonged problems in the Eurozone which is pushing investors to hedge in the safer haven- US dollars.
Some analysts say investors were currently “sitting on the fence” waiting to get a concrete defined economic trajectory that the PF is going to push after ending MMD’s 20 year-rule last September in an election campaign the PF anchored on pro-poor promises, among others.
According to market analysts, the recent decision of the Bank of Zambia to stay out of provision of foreign currency for importation of oil for the country has compounded the pressure that the local currency is currently going through.
Tanzania Zambia Mafuta Pipeline (TAZAMA), which imports the petroleum on behalf of country, is currently demanding between US$ 30,000 and US$ 40,000 per week from the market./POST