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Dollar supply leaves no impact on kwacha

THE supply of foreign currency on the market last week did not have any impact on the depreciating kwacha, FNB Zambia has stated. During last week’s trading, the kwacha continued on its depreciating path, opening trading at around K12.25 to K12.30 and closing between K12.37 and K12.42.

“We did, however, see an increase in the dollar supply on Friday. This had little impact on the local unit as it seems the dollar supply was wiped out by the surging demand. The increase in supply can be attributed to corporates converting dollars for tax and month-end obligations,” FNB Zambia stated.

“We see the kwacha open at K12.37/K12.42 this week. Provisional taxes are due by the 10th of October 2018. If we see significant dollar conversions to generate kwacha then the local unit will get the much-needed support. However, if sales are limited, the kwacha might continue to depreciate against a basket of currencies.”

It stated that it was eager to see what measures the Bank of Zambia would be put in place to counter inflationary pressures.

“In the interbank cash market, the weighted average rate of cost of funds increased from 9.69 per cent to 9.71 per cent. In light of the depreciating currency, it will be interesting to see if the monetary authorities will consider using monetary policy to counter inflationary effects of sustained currency weakness,” stated FNB Zambia.

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