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Economic factors to signal Kwacha’s performance

DEMAND and supply factors are expected to be the main drivers of the Kwacha’s next move against the United States (US) dollar within the trading range of about K10.10 and K10.40 in the short-term, financial market players say.
Zanaco says the local market activity was relatively subdued on Wednesday, with the move in the currency being mostly driven by the absence of dollar sellers on the day.
The bank says the local markets traded at its low for most of the day as demand from the interbank and corporates remained high.
“Yesterday [Thursday], the local currency trading is expected to remain the weaker of the two currencies oscillating within a K10.10 and K10.40 range, with demand and supply factors being the main drivers of the currency pairs next move,” the bank says in its daily newsletter.
On Wednesday, trading session witnessed the Kwacha slide further against the dollar from an opening level of K10.07 and K10.12, falling 90 ngwee to reach an intra-day low of K10.16 and K10.21 where it closed for the day.
Commenting on the Kwacha performance, Economics Association of Zambia president Chrispin Mphuka said it is important for Government to maintain stability of the Kwacha.
Dr Mphuka said there are various factors at play that will determine the stability of the Kwacha citing inflation rate as one of them.
“We hope inflation will start going down although if it does, it will be marginal. We believe that the inflation rate at the end of the year will be at 15 percent should the exchange rate remain stable. That will be a more plausible outlook,” he said.
First National Bank in its daily newsletter also says unless supported by inflows during the remainder of the week, the Kwacha could break the K10.20 level before going into the weekend.
The bank, however, says in a market lacking much depth and devoid of active interbank mechanism, moves can be swift and change direction suddenly.
“To the upside, resistance is at K10.25 and then K10.45, while to the downside, initial support is K10.10 and all the way down to K9.90 if backed by supply,” the newsletter reads.
Similarly, Cavmont in its market report says the Kwacha closed at K10.15 and K10.20, 0.99 percentage point weaker than Tuesday’s closing levels.
On the regional front, South Africa’s rand yesterday appreciated by 0.15 percentage point to trade at 13.99975 per dollar, while the Botswana pula, Kenyan shilling and Nigerian naira remained unchanged yesterday from Wednesday, at 10.55,101.2 and 304.5, respectively.

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