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THE KWACHA is trading flat currently and showing some mild signs of appreciation owing to a weakening dollar and local businesses hesitating to trade due to current political uncertainty, according to market experts. Financial market analyst Maambo Hamaundu says the kwacha’s mild appreciation against major currencies has only been supported by weak demand for dollars from businesses hesitating to trade. According to the Bank of Zambia, the kwacha was trading at K9.61 and K9.65 per dollar by September 1 from an average K9.85 and K9.89 during the final week of August. Slow kwacha trades on the foreign exchange market have characterised the two-week period since August 19 when United Party for National Development president Hakainde Hichilema and his running mate Geoffrey Mwamba disputed the victory of Edgar Lungu and Inonge Wina. Hamaundu observed that the kwacha had appreciated against major currencies on the back of weak dollar demand as businesses have been hit with uncertainty arising from the political impasse. “Generally, in terms of trade on the whole market, it has been relatively slow and I think in many instances, there is a feeling that demand has declined because business players are still faced with a bit of uncertainty and, therefore, they haven’t really gone into the mode where they re-engage in business. So, there has been a slump of business hence the low demand on the forex [foreign exchange], which has somehow supported an appreciation in the kwacha,” Hamaundu said in an interview. He said the kwacha’s appreciation should not excite market players because a strong productive base to support the local currency was still lacking. “As we go over this month-end period, we will see the kwacha might actually start going back to where it has been, slightly below K10 or thereabouts. It is not sustainable, it can only be sustained if we work on production,” explained Hamaundu. “But overall, that should not really be something we should be too excited about because at some point, normal market trends will have to kick in and if we have a kwacha that is not supported by production, it might still weaken.” And according to FNB Zambia, demand for dollars on the foreign exchange market has virtually disappeared at the moment. “Demand for the greenback has completely disappeared while long dollar holders are trying to cut their losses. The local currency is expected to continue with this appreciating trend until corporate month-end obligations are met,” FNB stated in a daily treasury newsletter. As at Thursday and Friday, FNB, however, noted that the kwacha was starting to lose its gains amidst little activity on the interbank. “Focus now switches to resistance levels with K9.90 being the short-term target. The backlog of demand may take us higher if supply levels remain low,” stated FNB. |
