REDUCED supply of the United States dollar on the foreign exchange market has pushed the kwacha on a depreciating trend after earlier recording reasonable gains.
Market experts have stated that the local currency will more than likely continue losing gains and the break of the K9.60 barrier is expected.
This comes after the kwacha a week ago touched the K9.25 per U.S. dollar level, an appreciation that was driven by temporally demand of the kwacha for tax obligations.
“The supply of US dollars in the local market seen over the last few weeks has receded. The kwacha continues to lose ground against the greenback, opening at K9.480/K9.520 yesterday and closing at K9.520/K9.5800,” FNB Zambia stated in its market update of Friday. “We are of the view that the kwacha will continue with this bearish trend. At this rate, a break of K9.600 is not far off.”
Meanwhile, the Treasury bill auction was heavily undersubscribed owing to the reduced liquidity in circulation.
“Market participants could also be holding off ahead of the bond auction. Total bids received amounted to ZMW457.60m, and only ZMW391.10m was allocated,” stated FNB Zambia.
“The 91- and 273-day bills dropped slightly, while the 182-day yield remained unchanged. The 1-year tenor, however, went up from 17.5569 per cent to 17.6 per cent. All bids were accepted, with the exception of bids above 12.5 per cent for the 182-day paper where bids ranged between from 10.999 per cent and 11.2499 per cent. On the other hand, we saw a significant reduction in market liquidity, from over ZMW910m to ZMW271m. The weighted average rate dropped slightly to 9.01 per cent from the previous 9.04 per cent.”