• The Kwacha has continued to suffer from excess demand.
• Demand for FOREX is higher than the supply.
• The Kwacha has been depreciating at a slow pace.
An Economist says the continued depreciation of the Kwacha is as a result of persistent high US dollar demand on the interbank market against limited supply.
Speaking in an interview with Money FM News, Gerald Soko said the demand for Foreign Exchange (FOREX) is higher than the supply.
Mr. Soko however noted that the Kwacha has been losing strength against major global convertible currencies at a slower rate.
“The Kwacha has continued to suffer from what I can call excess demand, so that is a situation where the demand of FOREX is higher than the supply like United States dollars for example in this particular case. But what is interesting to note is that yes the Kwacha has been depreciating but the pace has been slowing down,” Mr. Soko said.
He said as 2021 draws to a close, some of the business houses are withdrawing their participation in the FX market in terms of looking for foreign exchange.
“Obviously we are talking about winding down the year andwhat we see is that some of the business houses are beginning to withdraw their participation in the FX market in terms of looking for foreign exchange.”
Meanwhile, Mr. Soko stated that the local unit is expected to continue losing value even as the week comes to an end.
He further noted that as the festive season approaches, there will be excess Forex demand because retailers will need foreign exchange so that they can import consumable goods to sale during the festive period, thereby making the Kwacha to lose strength.
“As we head into the festive period, what we have seen is that retailers start positioning themselves in terms of looking for foreign exchange so that they can import consumable goods that they tend to sale during the festive period.”
“Christmas and New year are just some weeks away from today but placing orders has to be done now because you have deliveries to make so we expect demand to continue outweighing supply on the market,” he noted.
The US Dollar is currently buying at Seventeen Kwacha Forty One Ngwee and selling at Seventeen Kwacha Seventy Six Ngwee.