Business

Kwacha rebounds

TRYNESS TEMBO, Lusaka
IMPROVED foreign exchange supply on the market this week has resulted in the Kwacha rebounding, breaking the K9.00 barrier with a possibility of further appreciation, financial market players note.

Last month, the local currency broke the K9 barrier to trade at around K8.90 against the United States (US) dollar in some banks but later weakened above the K9.00 level due to reduced supply.

Cavmont Bank says on Tuesday, the local unit appreciated by 1.49 percent against the greenback after an increase in supply from sellers and exporters looking to settle mid-month statutory obligations.
In its market report, the bank says the Kwacha opened trading at K9.05 and K9.10 on Tuesday and later appreciated to an intra-day high of K8.91 and K8.96 on the interbank.
“Subdued demand also played a role in the Kwacha’s appreciation. The Kwacha closed at K8.915 and K8.965, K0.135 stronger than the day’s opening levels,” the bank says.
Similarly, First National Bank (FNB), in its daily treasury newsletter, says in characteristic fashion, the change in direction for the currency was sudden and sharp.
FNB says after two weeks of sustained weakness that saw dollar/Kwacha peak at a bid and offer of K9.11 and K9.16, the unit made huge ground to crash right through the K9.00 level and settle around K8.85 and K8.93.
“Supply had slowed to a trickle while demand strengthened. The new week came with improved foreign exchange supply and since panic-buying took out some of the major demand, the supply-heavy market had only one direction to go down.
“These [K8.85 and K8.93] feel like fairer levels, with scope for further appreciation still a strong possibility. Low inflation, strong copper prices, improving growth prospects all point to a stronger currency,” the newsletter reads.
FNB also says the improved macroeconomic variables also point to lower interest rates, although pricing in the bond market suggests divergent views.
And Zanaco also says the Kwacha was yesterday anticipated to be capped between K8.88 and K8.98 with a strong bias as corporates convert their foreign currency to settle mid-month obligations.

 

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