The kwacha has depreciated against major currency convertibles to breach the K12 per dollar psychological barrier for the second time in three months.
According to financial market players, the kwacha breached the K12 psychological barrier per dollar to trade above K12.00 on account of a continued imbalance of demand and supply of dollars on the local market, with correspondingly limited supply of the greenback.
The local unit was seen trading at a market average of K11.99 and K12.04 by close of business, Monday, for bid and offer respectively, according to the Bank of Zambia, compared to trading below K11.90 per dollar one month ago.
The last time the kwacha depreciated to hit the K12 per dollar barrier was on December 3 last year, where it traded at an average K11.77 and K12.00 for bid and offer respectively ahead of the Festive season.
“Friday’s trading session saw the USD/ZMW currency pair open the day trading at K12.03/K12.08 similar from the previous day. However, by noon, the currency pair was seen being quoted K11.97/K12.02. Despite the movement, most buyers were cautious as they were hoping for a rebound in the local unit. Most corporates on the buy side are still trading the currency pair cautiously as they hope the local unit will rebound below the $1/12.00 psychological barrier,” Cavmont stated in a market report issued, Monday.
“Current trends seem to indicate market activity is likely to remain on the low side should demand and supply levels remain insignificant.”
And FNB Zambia stated in its daily treasury newsletter released, Monday, that the local unit’s performance is likely to remain weak as the first quarter comes to a close.
“The local unit last weak traded on a bearish note. This trend is expected to continue, owing to an imbalance between the demand and supply of dollars. With Zambia being a net importer, demand for the greenback exceeds supply. We have not seen dollar flows coming from foreign investors, which has also contributed to the weak kwacha. We are of the view that the local unit will trade on the back foot today (Monday), most likely in the range of K12.00/12.05. There is very little event risk at the moment to drive the market in either direction,” stated FNB.
A check around some bureaus in Lusaka found the kwacha had breached the K12 per dollar mark by close of business.
The local currency traded at K12.09 and K12.15 per dollar for bid and offer respectively at Ace-FX Bureau, while Golden Coin Bureau, Cairo Road branch, quoted the local unit at K11.92 and K12.15 for bid and offer respectively.