The kwacha has resumed its depreciating trend against major currency convertibles, closing 2019 at K14 per dollar owing to a sustained high demand for the greenback on the local market versus little supply.
According to market players, the kwacha depreciated to hit the K14 per dollar barrier for the third time this year, closing 2019 at the same position it was in November and last May.
The local currency maintained a weak position, now averaging K14.00 and K14.05 per United States dollar, according to the Bank of Zambia (BoZ), from an average K13.70 per dollar last week, just before Christmas.
According to Cavmont Bank, the kwacha is likely to continue weakening in view of increasing demand for the greenback compared to limited supply.
“Monday’s trading session saw the kwacha breach the $1/K14.00 during the afternoon trading session following a wane in supply from sellers. The local unit began the day trading at K13.90/K13.95, with market activity from corporates being largely lacklustre. By afternoon, however, the local unit was seen being quoted at K14.07/K14.12, a level it maintained until close of business. In the absence of the improved supply, the local unit is likely to make a further move lower,” Cavmont stated in a market report released, Tuesday.
It, however, added that the local unit is expected to receive much-needed support from provisional tax payments falling due by the second week of the New Year.
“The kwacha is expected to show the next significant appreciation in the second week of January on the back of improved USD supply as we near provisional tax payments,” stated Cavmont.
During 2019, the kwacha depreciated to an all-time high of an average K15.31 per dollar in early December, losing value of around 8.56 per cent in a space of just three weeks from mid-November.
The kwacha’s depreciation to historic levels came in the wake of expensive electricity and fertilizer imports into the country in November.