THE kwacha is expected to continue depreciating against major currency convertibles, given the heightened demand for dollars on the local market, coupled with dwindling supply, market data shows.

According to financial market players, the kwacha is set to maintain a weak position, depreciating further beyond the K20.00 per dollar mark, compared to an average K18.60 per dollar just one month ago.

The kwacha’s huge losses mean that the local currency has depreciated by around eight per cent since mid-August, while losing around 10 per cent in value from its trading position at the start of the third quarter.

According to FNB, the kwacha is expected to continue losing value on account of heightened dollar demand, compounded by little supply of the greenback, offering almost no support for the local unit.

“USD/ZMW was little changed in yesterday’s (Tuesday’s) trading session, opening and closing at K19.82. Volumes ticked up slightly due to US dollar supply from some corporates, which was used to meet part of the demand pipeline. The central bank issued a statement on the state of the currency yesterday (Tuesday), in which it attributed the easing of the currency to reduced FX (foreign exchange) sales from the mines due to COVID-19 related supply disruptions, coupled with elevated demand for health-related supplies, energy, agricultural inputs and debt repayment obligations,” stated FNB in its daily market update.

“The central bank also indicated that the supply of mining tax receipts has increased the reserves and enabled it to provide some FX supply to the market over the past two months. In closing, the central bank reiterated the importance of the exchange rate in inflation outcomes and addressing exchange rate volatility would be key to maintaining price and financial system stability. Given the central bank’s position, we expect to see more support for the local unit in the medium-term. For now, we expect the currency to continue to trade on the back foot given the US dollar demand/supply imbalance.”

And Cavmont Bank revealed that the struggling local currency is receiving almost no support from exporters, who usually offload the greenback on the financial market to buy kwacha.

“The kwacha has seen very little support from exporters in recent weeks, while importers have been seen trading the currency pair actively, especially energy and agriculture players,” stated Cavmont in a separate market report, Wednesday.

Some bureaus, such as Golden Coin, quoted the kwacha at K19.90 and K20.29 per dollar for buying and selling respectively, while commercial banks, namely, Zanaco Plc, held the local unit at K19.76 and K20.13 per dollar for bid and offer respectively, by close of business, Wednesday.