Zambia’s currency, the Kwacha has continued to be vulnerable to the US dollar as it opened trading session on Monday at between K16.7960 and K16.4720 per US dollar, and has today Tuesday 28 September 2021 crossed back over the K17 per US dollar threshold at some bureaus in Lusaka.
According to the Zanaco’s weekly financial markets updates made available to the Zambian Business Times – ZBT, troubles for the Kwacha continued leaving it trading on the back foot for the 4th week in a row amidst ongoing excess demand conditions in the FX market.
The depreciation of the local unit accelerated to 1.1% (compared to the prior week’s 0.9%) after closing at K 16.58/16.63 per US dollar on Friday afternoon on the interbank from Monday morning’s open rate of K16.40/16.45.
Zanaco Bank indicates that in addition to tight FX liquidity, the Kwacha has also been reeling from a strong dollar which has been on a bullish run since the start of September.
Cognizant of the challenges commercial banks are facing to meet their clients’ FX needs, BoZ continued to help with injections of US$34 million in the supply support over the course of the week.
“Going into this week, we still see the Kwacha remaining on a weaker path due to excess demand conditions amid loose local currency liquidity (as government and private firms pay salaries and other month-end obligations) which is likely enhance FX demand.
As such, supply support from the central bank is set to continue this week to limit the pace of depreciation,” the Market update further states.
And a check by ZBT on the daily indicative rates at Absa Bank Zambia revealed that the kwacha was selling and buying between K16.79 and K16.47 respectively on Monday against the United States Dollar.
At Access Bank Zambia the local currency was buying at K16.4720 and selling at K16.7960 against the dollar and at Atlas Mara Bank, the Kwacha has been spotted to be trading between K16.4835 and K16.8165.
In last week’s trading session, the kwacha was vulnerable to the US dollar as supply flows maintained at a bare minimum against sustained demand. According to Zanaco daily treasury newsletter, the currency opened trading at K16.2500/16.300 per dollar on Monday morning and moved in one direction to close Friday at K16.500/16.600 per dollar.
“As we get into this week trading, market will take cues from supply flows that will come through,” the letter said.
And at Zambia Industrial Commercial Bank (ZICB), the Kwacha continued to trade on the back foot against the U.S Dollar with supply of the hard currency continuing to be outweighed by demand on Friday. The ZICB Daily Treasury Newsletter indicates that the local unit which opened at K16.560/16.610 was mostly weighed down by sustained demand closing the week at K16.600/16.650.
Analysts have called on the new Minister of Finance Situmbeko Musokotwane to take strong corrective action before the local unit slides further. Experience has shown that its more difficult to claw back value than to defense the exchange pair at lower rates.
