The kwacha has depreciated to hit the K13.00 per dollar pyschological barrier for the first time in three months, owing to a resumption in high demand for the greenback on the local market.
According to financial market players, the kwacha maintained a weak position, depreciating to breach the K13.00 per dollar mark, surrendering its recent gains where it appreciated to an average K12.80 and K12.90 between late June and July.
The local unit was seen trading at a market average of K12.99 and K13.04 per dollar by lunchtime, Thursday, for bid and offer, respectively, according to the Bank of Zambia (BoZ).
In its Treasury market update, FNB Zambia stated that the kwacha had depreciated owing to increased demand for the greenback against dwindling supply.
“The kwacha finally succumbed to the general market weakness, losing ground from K12.90/K12.95 to K13.00/K13.05 during Wednesday’s trading session. The discrepancy between dollar demand and supply continues as demand takes the leading role. As the kwacha takes a turn downhill, many exporters tend to take a step back with the view to maximize their returns,” FNB stated.
“Unless dollar supply is injected into the market, our trajectory is that the kwacha will continue to weaken. Resistance can be placed at K13.10, but it is unlikely that the unit will cross that level.”
And Cavmont Bank stated that the local currency was likely to continue depreciating if dollar supply remained weak amidst sustained high demand for the greenback.
“The move made by the local unit was a result of lower supply as well as increased demand for the greenback on the interbank. The kwacha’s movement was also mirrored by other emerging market currencies like the South African rand, which fell to an intra-day low of $1/ZAR15.09 (Reuters). The local unit is likely to move further downwards having broken past the resistance level of $1/K13.00 should supply side remain choppy,” stated Cavmont in its market report released, Thursday.
Meanwhile, a check at Golden Coin Bureau, Cairo Road branch, revealed that the local unit was trading at K12.90 and K13.15 per dollar for bid and offer, respectively, by lunchtime, Thursday.