Zambia’s kwacha could slide to new record lows this week

Zambia’s kwacha could slide to new record lows this week

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Kwacha Dollar Lusakavoice
Kwacha Dollar Lusakavoice

Zambia’s kwacha could slide to new record lows this week due to a chronic foreign currency shortage. Other African currencies may have a mixed outlook.

ZAMBIA

Zambia’s kwacha fell more than 2.3 percent to a new record low against the dollar on Thursday, after a worsening foreign currency crunch fuelled panic buying in Africa’s second-biggest copper producer.

The unit traded fell to 7.6500 per dollar, down sharply from 7.2000 a week ago.

“The supply of dollars is very limited and it is unlikely that there will be a very significant change going into next week,” a Lusaka-based commercial bank trader said.

The kwacha has fallen about 20 percent since the start of the year, mainly hit by lower copper prices and weak demand for the metal from big importer China.

GHANA

Ghana’s cedi could weaken, with offshore hard currency inflows expected to remain muted.

The unit has shed 9 percent to the greenback since January, and traders said the central bank has not been as aggressive as in the past in support the local currency through dollar sales.

However, the currency could stabilise once Ghana starts a three-year $940 million aid package with the IMF next month, which analysts say could unlock much needed hard currency flows.

“Once the first major disbursement of IMF funds occurs, we may see some stability in the USD/GHS, as other investors may have a reason to direct investment towards the country,” Biggles Amponsah of Accra-based research firm Dortis said.

NIGERIA

Nigeria’s naira could take its cue from the outcome of the central bank’s rate-fixing monetary policy committee meeting on Tuesday, just before a March 28 general election.

The naira has traded around 199 to the dollar over the last two weeks after the central bank last month said it would sell dollars only at 198 naira through the interbank.

“The naira will continue to trade within a band until the next move by the central bank,” one dealer said.

KENYA

The Kenyan shilling is expected to trade in a tight range, supported by dollar inflows with foreign investors bidding for a bond worth 25 billion shillings ($272 million).

But the long term prognosis points to a softer local unit.

“Overall the bias is for a weaker shilling, the question is to what level and how fast,” one trader said, citing the fact that Kenya is a net importer of goods and services.

The central bank sold an undisclosed amount of dollars on Monday when the shilling weakened sharply against the U.S. currency. The local currency has since traded in a tight range.

TANZANIA

The Tanzanian shilling could strengthen, helped by dollar sales by companies preparing to pay taxes and salaries.

“We think the local currency will gain some ground against the dollar in the days ahead,” saidTheopistar Mnale, a trader at TIB Development Bank.

The Bank of Tanzania said it had traded $53.65 million on the interbank foreign exchange market over the past week.

UGANDA

Uganda’s shilling is forecast to trade in a stable range, underpinned by a lack of local currency liquidity.

The market has fallen short of shillings after an aggressive build-up of dollar positions that pushed the local unit to an all-time low of 3,116/3,126 last week.

“Demand will remain subdued because no one can afford to take positions because the cost of funds is high,” said Faisal Bukenya, head of market making at Barclays Bank.

 http://www.moneyweb.co.za/news-fast-news/africa-week-ahead-fx-turmoil-ahead-for-zambian-kwacha-others-mixed/

 

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