• Last week, the Kwacha traded within a very tight range.
• There was a marginal appreciation of about 0.5 percent.
• Demand for US dollars is pretty much soft.
The Zambian Kwacha has continued to strengthen against the United States due to less demand for the greenback on the interbank market.
The local currency opened the week trading between K16.87 Ngwee and 17.20 against the US Dollar.
And an Economist observed that last week, the Kwacha traded within a very tight range as there was less movement in the currency.
Gerald Soko told Money FM News in an interview that despite less movements observed last week, the local currency posted marginal strength against the US dollar of about 0.5 percent.
Mr. Soko noted that this is because Bank of Zambia’s injection of US dollars on the interbank market reduced by 13.5 percent to an average of 7.4 million US dollars per day from 8.65 million US dollars per day.
“As far as last week was concerned, the Kwacha traded within a very tight range, that is to say there was no much movement but even then, there was a marginal appreciation which the Kwacha posted, very small it was about 0.5 percent against the US dollar.”
“The reason has been in this particular market is demand itself is pretty much soft because actually during the course of the week, supply on the interbank market when you are talking about the trade between the banks themselves and also in this I’m including injections from the Central bank, during the course of last week actually fail by 13.5 percent to an average of US$7.4 million per day from US$8.65 million per day,” Mr. Soko noted.
According to Mr. Soko, the reduction in supply of dollars allowed the Kwacha to find room for a marginal appreciation, which is a clear indication that demand for the Greenback is low.
“So you have a situation where less supply is sort of healthy but now in the midst of reduced supply on the interbank, if the Kwacha is able to find room for a marginal appreciation, that’s an indication that demand is sort of soft,” he stated.
Mr. Soko further said the local unit is this week expected to remain range bound, with less movement in terms of appreciation or depreciation due to soft demand for US dollars and continued injection of the Greenback into the market by the Central Bank.
“In terms of going forward, I think the Kwacha will remain range bound, I don’t see it moving significantly in either the two directions in terms of appreciation or depreciation pretty, much speaking to the story of soft demand but at the same time, what I think is going to hold it from depreciation is the fact the Central bank is obviously going to continue supporting it with the injection that we have seen in the market since government dollarized the mining taxes. So there is no much change in the terrain of the Kwacha,” Mr. Soko said.
As of today Thursday, 12th May 2022, the current exchange rate of 1 US Dollar is equal to K16.88 ngwee and K17.21 ngwee, representing a decrease of -24.02% compared with the same period last year, 12th May 2021, when 1 US Dollar equaled K22.38 ngwee.