Thursday, February 19, 2009

Zambian Kwacha makes dramatic come back in late trade

Lusaka Times, 19/02/2009

The Barclays Treasury Newsletter this morning reports that the Kwacha bounced back in late trades on Wednesday after earlier slipping to a new historical low, touching the psychological K5 800/USD level in a highly volatile session. The report further said that spurts of demand and supply characterised trading, with early dollar buying prompting a swift depreciation to a low of K5 780/5 800 by midmorning after the currency pair opened at K5 650/5 670 per USD.

The local currency made an unprecedented comeback of nearly 4% from market lows to close at K5560/5580 on dollar offloading from market players. Thus, this reduced the Kwacha’s year-to-date depreciation to 14.8% from 17% at previous close.

Volatility, exacerbated by relatively thin corporate flows, is likely to continue as market players trade cautiously. Although the Kwacha looks fundamentally bearish, occasional supply flows are expected to give the Kwacha relative resilience to the dollar. Technical support is pegged at K5 500/USD and resistance at K5 800/USD.

Recently the Kwacha has continued to fall under pressure to the dollar . Golden Coin Bureau De Change says the kwacha’s fall is being driven both by market forces and speculation.

Golden Coin Manager, Douglas Chilundu told ZNBC news that the 2009 budget announcement has stimulated businesses to start importing to meet contractual obligations.

Mr. Chilundu called on the central bank to stabilize the kwacha to a comfortable level of five thousand kwacha to one U.S. dollar.