The kwacha has depreciated against major currency convertibles to breach the K11 per dollar psychological barrier for the first time since April, 2016.
And FNB Zambia says there is a sense of panic in the foreign exchange market as players do not seem to know where the kwacha’s resistance levels will be.
According to financial market players, the kwacha has breached the K11 psychological barrier per dollar to trade above K11.00 on account of heightened demand for dollars on the local market.
The local unit was seen trading at K10.99 and K11.06 by mid-morning, Wednesday, for bid and offer respectively, according to the Bank of Zambia, down from an average of K10.30 per dollar in less than one week.
This depreciation of around six per cent in less than a week also comes in the wake of revelations surrounding the British government’s announcement to suspend its aid funding to the Zambian government.
The last time the kwacha depreciated to hit the K11 per dollar barrier was April, 2016, where it traded above K11.00 per dollar by the end the first quarter of that year.
And according to FNB Zambia, the kwacha has weakened significantly, depreciating to above the K11 per dollar mark, largely triggered by negative economic sentiments, amidst the usual demand-supply factors.
“The local unit continues to slip against the greenback. At its climax, the mid-rate reached USD/ZMW11.02 in yesterday’s trading session – levels last seen in April 2016. As sentiment continues to dampen, the local unit has had no firm footing against a basket of currencies,” FNB stated in a daily treasury newsletter released, Wednesday.
“Due to these elevated levels, a sense of panic has embraced the market as the resistance level of USD/ZMW remains unknown. Tuesday’s trading opened at K10.90/K10.95 and closed at K11.00/K11.05. We are of the view that the kwacha will continue on a bearish note.”
And Cavmont stated in its market report that the local currency has continued on its depreciating trend owing to the continued strong demand for dollars by corporates.
“The kwacha continued its movement against the US dollar on Tuesday as demand continued to outweigh supply on interbank as well as from corporate buyers. In the interim, most market participants are likely to remain cautious as they seek to determine the kwacha’s next move,” stated Cavmont.
Meanwhile, a check around several bureaus in Lusaka found the kwacha had significantly depreciated to over the K11 per dollar mark.
The kwacha traded at K11.01 and K11.05 per dollar for bid and offer respectively at Ace-FX Bureau, while the local unit was quoted at K11.02 and K11.24 per dollar at Golden Coin Bureau by lunchtime yesterday.