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Kwacha back on slide

THE kwacha has continued to suffer losses against the US dollar, declining from K12.225/12.275 to K12.600, the weakest for the day, according to First National Bank Zambia.

FNB Zambia’s daily update yesterday indicates that towards the close of business on Tuesday, the kwacha recouped some losses, closing at K12.400/12.450 per US dollar.

“Provisional taxes are due today. This could give the kwacha some much-needed support as corporates convert dollars into kwacha. Nonetheless, appetite for dollars is still strong. The kwacha appreciation is likely to be short-lived as dollar supply remains scarce,” according to FNB Zambia. “We see the kwacha making gains in the first half of the trading session and depreciating thereafter as market players take advantage of the fairly low levels.”

It also stated that despite just over K312 million in circulation, the central bank had returned to the market via OMO (open market operation to mop excess liquidity).

“With the low levels of liquidity and the central banks’ activity in OMO, we expect the weighted average interbank rate to go up,” stated FNB Zambia.

On Monday, the local unit continued to depreciate against the US dollar following increased demand for the greenback on interbank.

According to a Cavmont Market report, the local unit touched an intra-day low of K12.2500/K12.300 from Monday’s opening levels of K11.900/K11.950.

“Most corporates were still cautious, especially on the buy side as they anticipated a rally in the local unit from the expected inflows as companies convert to meet local tax and statutory obligations due this week. In the absence of improved inflows, the local unit may come under pressure to touch previous resistance levels last seen a week
ago,” the report stated.

The report further stated that commercial banks’ aggregate current account decreased by K1,435.82 to K548.31 million while the overnight borrowing and lending rate increased by 0.05 per cent to 9.66 per cent.

“Total funds traded on Interbank was K415 million,” the Cavmont Market report revealed.

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