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Low dollar supply to negatively affect Kwacha

THE days ahead are expected to be characterised by low United States dollar supply, thus affecting the performance of the Kwacha as the liquidity level witnesses a further drop, a financial market player says.
Zanaco says the Kwacha, which on Wednesday appreciated to K9.92 and K9.97, three ngwee stronger than its previous day’s rate, may not maintain the momentum in the coming days.
“Despite the local unit’s gains, we still expect a weaker Kwacha in the days ahead, with the strain mainly emanating from low supply of dollars on the market. Trading range is expected to be between K9.85 and K9.95,” the bank says in its daily treasury newsletter.
However, the Kwacha may be boosted by yesterday’s treasury bill auction.
Meanwhile, First National Bank (FNB) anticipates the local unit to remain bullish.
“Our outlook for today [yesterday] and the days ahead remains bullish. Demand for the greenback has eased significantly, while dollar supply is on the rise. We are of the view that today, Kwacha/dollar will break K9.90. We see support at K9.84 and resistance at K9.90,” the bank says in its newsletter.
The bank adds: “We saw a sudden turn of events in yesterday’s [Wednesday] trading session. After touching K10.00 in the previous day’s trading session, the Kwacha recouped its losses to close at 9.92. Bids were as low as K9.87 against the dollar.”
In the money markets, FNB reports that, after one month, the central bank has resumed its open market operations, which is an activity by the central bank to give or get liquidity its currency to or from a bank or groups of banks, looking to mop up K200 million of excess liquidity on Wednesday afternoon’s session.
With over K2.6 billion in circulation, there is reason to believe that the central bank is getting uncomfortable with the current liquidity level which was at K2.8 billion.