TRYNESS TEMBO, Lusaka
TIGHT Kwacha liquidity in the money market coupled with anticipated United States (US) dollar inflow increase is expected to boost the local unit in the short term, financial market players note.
Market liquidity refers to the extent to which a market, such as a countryâ€™s stock market or a cityâ€™s real estate market, allows assets to be bought and sold at stable prices while the anticipated greenback is attributed to corporates preparing for month-end tax obligation.
Some banks, namely Cavmont Bank, Zanaco and Access Bankâ€™s financial market outlook points to a stronger Kwacha against the US dollar.
Cavmont Bank says the local unit continued to outperform the dollar on Tuesday which traded on the backfoot against most major currencies.
In its market report, the bank says the Kwacha opened trading on Tuesday at K10.07 and K10.12, posting a marginal gain of K0.045, following increased inflows from corporate sellers, while most buyers continued trading the currency pair cautiously.
â€œThe Kwacha closed at K10.025 and K10.075, 0.45 percentage points stronger than the dayâ€™s opening levels,â€ the statement reads.
Similarly, Zanaco in its daily treasury newsletter says the Kwacha is anticipated to trade in the range of K9.50 and K10.10 in the short term.
On Tuesday, the Kwacha continued its recent rally on the back of increased dollar supply from corporates as they began to prepare for month-end obligations.
â€œThe local unit opened trading at K10.30 and K10.35 versus the dollar before climbing to a high of K10.05 and K10.10 as corporates became more active in the market selling the greenback,â€ the bank notes.
Access Bank in its morning digest also says the Kwacha opened trading at K10.25 and K10.30 and closed at K10.05 and K10.10 on Tuesday.
On the commodities front, Reuters reports that copper prices on the London Metal Exchange (LME) yesterday slid alongside oil as the dollar rose after a Federal official said US interest rates could rise as soon as September, reinforcing negative sentiment fuelled by worries about demand.
Benchmark copper on the LME was down 0.8 percentage point to US$4,771 a tonne at 09: 38 Green Mediation time.
Earlier this week, copper price fell to a one-month low of US$4,750.50 after weak economic data raised doubts about the strength of demand in China.
China accounts for nearly half of global consumption estimated at 22 million tonnes this year.
TRYNESS TEMBO, Lusaka