THE kwacha has depreciated to hit the K16.00 per dollar psychological barrier for the first time in Zambia’s history, owing to a sustained high demand for the greenback on the local market, compounded with little supply.
According to financial market players, the kwacha maintained a weak position, depreciating to breach and crash through the K16.00 per dollar mark, continuing its depreciating trend to now average K16.01 per dollar from averaging around K15.32 per dollar a fortnight ago, a further slide from K14.70 per dollar since the start of the New Year.
The kwacha’s huge losses mean that the local currency has depreciated by nearly five per cent in a space of just two weeks.
This is the first-ever time the local currency depreciated to hit these levels in Zambia’s history after hitting the K15 per dollar mark last month.
According to the Bank of Zambia (BoZ), the kwacha hit an average K15.96 and K16.01 per dollar for bid and offer, respectively, by close of business, Friday.
Most bureaus around Lusaka also quoted the local currency at over K16 per dollar.
And commercial banks, such as Zanaco and FNB Zambia quoted the local currency trading at an average K15.84 and K16.15 per dollar; K15.71 and K16.03 per dollar, respectively, by close of business, Friday.
In its Treasury market update released, Friday, FNB noted that the kwacha’s losses had continued on the back sustained high dollar demand versus little supply on the local market.
“Although dollar supply was evident in the market during Wednesday’s trading, the move downwards was not significant as dollar demand continues to drive the FX markets. Another holiday, another black day as the fight against Coronavirus continues. FX and commodity markets traded in the red on Thursday as a risk-off mode continues,” FNB stated in its daily market update released, Friday.
And Cavmont Bank had stated that the kwacha was likely trade above K15 per dollar mark if supply remained weak this month.
“Despite the downside movement, activity from importers and buyers was largely low as most were still anticipating a rebound in the local unit. In the absence of improved inflows, the kwacha is likely to establish a new equilibrium level above the $1/K15.00,” stated Cavmont in a market report released earlier this month.
Most market experts predicted that the kwacha was likely to continue its free-fall amidst low economic productivity, compounded with heavy imports, which continues to put pressure on the local currency.