• This week the Kwacha is expected to return to its weakening path due to lack of supply on the market.
• Demand for dollars is high whereas the supply is low.
• With a depreciation bias, the supply on the market will be low.
Excessive demand for United States dollars on the interbank market has continued to put pressure on the Zambian Kwacha.
The Kwacha has since continued to trade on the back foot despite posting some positive gains last week.
According to an Economist, the local unit is this week expected to trade weaker, with a depreciation rate of 1 percent as a result of persistent high US dollar demand against limited supply.
Dr. Patrick Chilehse told Money FM News in an interview that the Kwacha’s performance will only improve if Bank of Zambia continues to excessively intervene on the market by offloading more US dollars.
Dr. Chileshe however said this is unlikely to happen, hence the currency is likely to return to its weakening path.
“Going into this week, we expect the Kwacha to return to its weakening path due to lack of supply on the market unless the Central bank continues intervening excessively on the market which we believe is not likely to happen, so we are likely to see the Kwacha trading weaker.”
“The demand for dollars is high whereas the supply is low and largely that has been the biggest problem. So because of that we are actually having the Kwacha depreciating. With a depreciation bias, the supply on the market will be low. We actually expect it to just post a marginal depreciation of about 1 percent this week, it might not get back to K18,” Dr. Chileshe noted.
He stated that for the depreciation to reach the levels of above K18, it could take a little bit more time.
And Dr. Chileshe revealed the appreciation of the Kwacha observed last week was as a result of improved supply of US dollars after Bank of Zambia sold over 40 million dollars on the market on Monday.
He noted that last week, the local unit recorded appreciations of about 2.9 percent from K18.24 and K18.29 to K17.71 and K 17.76 respectively.
“The Kwacha’s performance in the last few days especially last week has been positive, recording appreciations of about 2.9 percent last week from K18.24, K18.29 to K17.71 and K17.76 largely because of improved supply of US dollars in the market after the Central bank sold more than 40 million dollars in the market on Monday which also coincided with improved offshore inflows into the Zambian market which led to the appreciation of the Kwacha,” he added.
The currency has today Wednesday 23rd March 2022, opened the market trading at K17.60 Ngwee and K17.95 on the bid and offer respectively.