TRYNESS TEMBO, Lusaka
THE Kwacha is anticipated to receive support from the upcoming third quarter tax payment of companies after breaking the K9.60 level this week, First National Bank (FNB) says.
In its daily treasury newsletter, FNB says the local unit breached K9.60 as it weakened further against the United States (US) dollar as demand continued to outweigh supply.
“The traditional foreign currency suppliers seem to have Kwacha funding which they are currently using to meet obligations. Firmly in the K9.60 handle, dollar/Kwacha resistance is now at K9.70.
“We may see a turn of events as companies prepare for third quarter tax payments. It is fairly common for the Kwacha to strengthen around quarterly tax due dates,” the report reads.
FNB says demand has also been seen from some offshore investors possibly after unwinding Kwacha-denominated assets.
The cash market has been relatively short, with overnight interbank funds fetching 10 percent.
Similarly, an analyst attributes the depreciation Kwacha against the greenback to mainly to businesses converting the local unit to import goods.
“The demand for the dollar has increased due to various factors such as people importing more,” an analyst who sought anonymity said.
Zanaco also says strong greenback demand is likely to put the local unit on the back foot in the short term with expected range to remain between K9.55 and K9.65.
In its daily treasury newsletter, the bank notes that the local unit continued to weaken against the dollar, losing 1.5 ngwee on Monday from the previous day’s close of K9.525 and K9.575.
The bank says the move was largely interbank-driven with corporate and Government agencies buying dollars.
“The local unit remained under pressure against the greenback as the short supply of dollar continues on the market. We expect the local unit to trade in the range K9.55 and K9.75,” United Bank for Africa in its treasury newsletter.