Money market liquidity rises

ZAMBIA’S money market on Wednesday witnessed an increase in liquidity levels to over K1.68 billion following the reduction in the statutory reserve ratio from 12.5 percent to 9.5 percent.

This week, the local money market has seen a fluctuation in liquidity levels with Tuesday’s being at about K1.51 billion from Monday’s opening of K1.97 billion.
“Market liquidity has been on the rise, with over K1,687,37 million in circulation,” First National Bank (FNB) says in its newsletter.
FNB anticipates that the high liquidity levels would positively contribute to yesterday’s treasury bill auction.
The bank, however, says the weighted-average interbank rate has also dropped slightly to 11.93 percent from 12 percent.
“We expect yields to come off in today’s [yesterday] treasury bill auction given the high liquidity levels,” FNB notes.
Zanaco, in its daily treasury newsletter, also acknowledges the increase in liquidity levels and that resulted in the Bank of Zambia (BoZ) being absent from the open market operations (OMOs).
BoZ participates in the OMO, which is an activity by the central bank to take liquidity from a bank or a group of banks.
“BoZ was absent from OMO despite the money market having more than K1.6 billion,” the bank says.
On the local currency market, the Kwacha’s strong trend is expected to continue in the short term as corporates begin to convert United States (US) dollars to meet monthend obligations.
The domestic unit is expected to trade within a K9.00 and K9.05 range.
Zanaco says the Kwacha posted minor gains against the dollar on Wednesday, on the back of reduced demand of the greenback.
It says the currency market was relatively calmer on the day as corporate and interbank demand and supply for the greenback was just about matched.
Meanwhile, copper, aluminium and zinc rose to multi-year highs yesterday, leading a broad-based rally in metals, on expectations that China’s reform of its metal industry will curb supply against a background of robust demand.
London Metal Exchange copper advanced to its highest since November 27, 2014 at US$6,580 a tonne, before paring gains to US$6,556 a tonne, still up 0.4 percentage point and extending the prior session’s 2.4-percent rally. Copper prices are up 18 percent this year.

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