Kwacha extends gains as foreign exchange inflows strengthen, hits best performance since November, 2023

The Zambian kwacha extended its gains on Thursday, rising for a second consecutive session as increased foreign exchange inflows continued to lift market sentiment.

According to Bloomberg data, the local unit appreciated by more than 1.0 percent, closing just below K22.50 per US dollar — a level last recorded in November 2023.

Market analysts said the kwacha’s advance could be sustained in the near term, driven by month-end conversions and stronger foreign exchange supply.

In its daily market commentary, Access Bank Group observed that the US dollar traded within a narrow range as global investors awaited Friday’s US inflation report for clues on the Federal Reserve’s next policy move.

Read more: Zambian Kwacha slips for second straight session amid rising dollar demand

The Bloomberg Dollar Spot Index edged up 0.1 percent after earlier losses during what has become the second-longest US government shutdown in history.

“Only a major upside surprise in the inflation data would alter expectations for a 25-basis-point Fed rate cut next week,” Access Bank stated.

“However, the report could shape rate outlooks further along the curve, likely increasing market volatility.”

In regional developments, South Africa’s consumer price index (CPI) rose slightly to 3.4 percent year-on-year in September, up from 3.3 percent in August — a move broadly in line with market expectations.

The increase was mainly attributed to slower fuel deflation, while food prices continued to ease.

Despite the marginal uptick, inflation remains near the lower bound of the South African Reserve Bank’s (SARB) 3–6 percent target range, leaving room for possible monetary easing.

Economists noted that SARB Governor, Lesetja Kganyago, had maintained a cautious tone as the central bank works to reinforce credibility around its new 3 percent inflation anchor, replacing the previous 4.5 percent midpoint focus.

According to Fitch Ratings, formal adoption of the new inflation target by South Africa’s National Treasury is expected during next month’s Medium-Term Budget Policy Statement (MTBPS).

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