Kwacha steady against dollar as copper price falls

MINERS processing copper at one of the mines on the Copperbelt.

THE central bank was last week active on the open market operations (OMO), as liquidity continued to drop marginally amid the Kwacha holding on firmly against the United States dollar, a financial market player says.
Zanaco says the money market continued to experience a downward drop in liquidity levels from K2.6 billion seen the previous day to K2. 4 billion, with the Bank of Zambia (BoZ) being in the OMO, which is an activity by the central bank to give or get its currency to or from a bank or groups of banks.
According to the bank’s treasury newsletter, the move could indicate that interbank borrowing rates will be above 15 percent.
“BoZ was in the market in both morning and afternoon sessions on OMO, this may signal rates remaining above 15 percent in the short term. The cost of borrowing funds on interbank stood at 15.45 percent from 15.10 percent,” the bank says.
On the foreign exchange market, the Kwacha held steady against the dollar on Thursday with demand for the greenback appearing to taper off and easing pressure on the local unit.
“The local unit opened at K9.85 and K9.90 per dollar, stronger than its previous day’s close of K9.87 and K9.92. The Kwacha fluctuated within a tight range kept in line by almost matched supply and demand in local trading,” the bank says.
The bank, however said the Kwacha could remain vulnerable in the short term in the absence of significant dollar inflows.
“Today’s [Friday’s] trading is expected to be in a range of K9.95 and K10.00.
On the commodities market, the price of copper fell on Friday after China’s central bank moved to tighten monetary policy, curbing demand for commodities.
The London Metal Exchange’s three-month copper contract was down 1.4 percent at US$5,827 a tonne in morning trade after a volatile week, market watch reports.
“The decline put copper on course for a 1.1 percent drop for the week. The price briefly touched a June 2015 high over US$6,000 a tonne on Wednesday after workers voted to go on strike at Chile’s huge Escondida mine,” market watch reports.

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