The kwacha has depreciated to a low of K10.13 against the US dollar, the worst on record so far in 2018, market data reveals.
According to financial market players, the kwacha has continued depreciating, mainly triggered by reduced dollar supply on the local market.
Data shows that the local currency hit lows of K10.13 and K10.18 per dollar for bid and offer respectively, by mid-May, the lowest so far this year.
The kwacha was seen trading at K10.07 and K10.27 per dollar by mid-morning yesterday, according to the Bank of Zambia’s market average retail rates.
“The kwacha continued with its weakening trend against the greenback, opening at K10.05/K10.10. Due to increased demand for dollars, USD/ZMW closed yesterday (Thursday) at K10.13/K10.18) — levels we haven’t seen since December 2017. The kwacha depreciation can be attributed to the reduced dollar supply in the local market,” FNB Zambia stated in its daily treasury newsletter, Friday.
“Nonetheless, the current levels remain attractive to exporters, and if they do decide to sell dollars at these levels, we will most likely see a pullback on the rate. The kwacha, however, remains skewed to the upside, with a break of K10.20 not far off.”
FNB also stated that the dollar’s performance against currencies in the region is strong.
“Globally, the dollar remains king against a basket of currencies. This, together with increased demand for both the greenback and rand, has put increased pressure on the local unit,” stated FNB.
And Cavmont Bank stated that most players were hoping for the local currency to rebound.
“Friday saw kwacha maintain its status quo against the US dollar, though it continued trading above the $/K10.10 mark. The local unit began the day trading at K10.125 / K10.175 on the interbank bid and offer respectively, a level it maintained until close of business. Trading was largely on the quiet side and was mostly seen on interbank,” Cavmont stated in its market report issued, Monday.
“On the other hand, there was little corporate activity as most players most players were hoping for the local unit to rebound. The kwacha’s performance was reflected by other emerging market currencies like the South African rand, which also fell against the U.S dollar to an intra-day low $/ZAR12.7000. In the interim, the market is expected to remain flat, with most players trading the currency pair on the side lines.”