• The Central Bank pumped in about US$40 million.
• Offshore players are also coming to the market to buy bonds.
• There is expectation of improved FX supply this week.
The Zambian Kwacha has started recovering, with financial market players citing intervention by the central bank.
According to market sources, the interbank was flooded with dollars from the central bank, yesterday resulting in the kwacha appreciating against major convertible currencies
And an Economist says Bank of Zambia’s continued intervention by selling dollars has given the kwacha the much needed support.
Gerald Soko told Money FM News in an interview that yesterday, the Central Bank pumped in about US$40 million, at a time that there is a bond auction this Friday.
Mr. Soko said offshore players are also coming to the market to buy bonds, therefore there is expectation of improved Foreign Exchange supply this week.
“The trigger itself is the Central Bank, so the Bank of Zambia actually came in heavily in the market yesterday, and offloaded about US$40 million and this is happening at a time that there is a bond auction on Friday, obviously offshore players are also coming to the market to buy bonds, and so there is expectation of improved FX supply this week,” Mr. Soko noted.
He further noted that in the week that ended 18th February 2022, Bank of Zambia also offloaded about 42 million US dollars in terms of Foreign Exchange to help reduce pressure on the Kwacha.
“It is the same thing that happened in February when the Central Bank pumped in about US$42 million in the week that ended 18th of February in terms of FX in a week that the market is expecting offshore players to actually help improve with the supply of foreign exchange, so that is what is driving the Kwacha at the moment in terms of the appreciation that started yesterday.
“Obviously we are going to see this happening throughout the week especially when we get to see the level of flows from offshore players that we saw in February,” he said.
And Mr. Soko said by the close of the week, the Kwacha is likely to touch K17.05 ngwee depending on the volumes of flows that are coming from the offshore players.
“So yesterday when it changed direction, we were going close to K18.4 ngwee on the interbank, K15 is very far to be touched a level, I think by the close of the week, depending on the volumes of flows that are coming from the offshore players, we may see it touch maybe K17.05 that is a possibility but K15 no and maybe we may not get below K17,” Mr. Soko added.
Yesterday, the currency opened and closed the market trading at K18.12 ngwee and K18.47 ngwee respectively.
And today, the Kwacha has gained touching K17.82 ngwee and K18.17 ngwee per US dollar.
