TRYNESS TEMBO, Lusaka
THE upcoming tax payment by corporates is expected to contribute to the strengthening of the Kwacha, which has been trading on the backfoot of the United States (US) dollar in the past weeks.
Access Bank Zambia says that the local unit has been under pressure due to increased demand for greenback.
The local unit has failed to break the critical K9.23 level on the upside ahead of intermediate taxes due mid-month and provisional taxes due by October14.
“Demand largely from the oil sector has seen the Kwacha off its one month range of K8.95 and K9.05 that characterised the most part of last month. The Kwacha is expected to strengthen due to tax payments,” the bank says in its treasury market watch.
On Thursday, the local unit stayed flat at K9.12 and K9.17 per dollar [for bid and offer respectively] at a level that has held for the last three trading sessions as local currency liquidity levels dropped on account of the Bank of Zambia conducting open market operations (OMOs) to withdraw.
The central bank was on the OMOs, which is an activity by the central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.
However, Zanaco in its daily treasury newsletter says demand for the dollar is expected to persist in the short-term putting pressure on the local currency.
The trading is expected to range between K9.15 and K9.20 per dollar in the short-term.
“The Kwacha weakened modestly on Thursday on the back of a continued pickup in demand for dollars from importers. The local unit opened trading at K9.11 and K9.16, unchanged from the previous days close.
“Much of the appetite for the greenback was corporate demand-driven on the day, which saw the Kwacha hit a low of K9.15/K9.20 where it traded for most of the day,” the statement reads.
It eventually closed at K9.13 and K9.18 on the bid and offer respectively.
Similarly, First National Bank (FNB), in its daily newsletter says there are signs that the Kwacha will remain under some pressure from rising demand.
“We expect [the Kwacha] to breach the current band of K9.15 and K9.20 today [on Friday],”the bank notes.