$8.5 million support for forex market does little to prop Kwacha, as currency struggles against US dollar

The Zambian Kwacha weakened further against the United States (US) dollar in Wednesday’s trading session.

This was despite the efforts by the Bank of Zambia (BoZ) stepping in by offloading US$8.5 million onto the market on Tuesday to relief pressure on the local currency.

During the trading session on Tuesday, the Zambian Kwacha lost more ground against the US dollar, prompting the Central bank to step in.

The BoZ offloaded US$8.5 million onto the market in effort to relieve some pressure off the local currency and partially offset the steadily rising demand for the US dollar.

This, however, did not seem to help much as the local currency the following day, Wednesday, weakened further against the US dollar.

Access Bank in its daily market update showed that the market witnessed a persistent dry spell of dollar inflows while demand for the greenback continued to grow, exerting pressure on the local unit.

“On the market average interbank bid and offer, the USD/ZMW opened at K26.0073/26.0567 and closed at K26.1283/26.1783, respectively.

“The Kwacha is projected to follow a downward trajectory in the near term,” Access stated.

Absa Bank, also indicated that the Zambian Kwacha posted minor losses against the US dollar in Wednesday’s session.

The bank attributed this to the increased demand for the greenback from large corporates and other importers amid thin inflows.

At market open, the local currency was quoted at K25.900/25.950, on the bid and offer, respectively.

“The Kwacha weakened to K26.050/26.100 by midday and closed the day off at K26.150/26.200.

“Near term, we anticipate the local unit’s next move to be dictated by demand and supply dynamics, but the local unit may get some support from the upcoming payroll and wage conversions,” Absa stated.

Elsewhere, the South African rand fell against the dollar on Wednesday as traders awaited Federal Reserve meeting minutes for hints on the interest rate path of the world’s biggest economy.

The rand traded at 18.2475 against the dollar, about one percent weaker than its previous close.

The local currency hit 18.0300 on Tuesday, its strongest level since August.

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