Kwacha strengthens against dollar despite third consecutive weekly loss

The Zambian Kwacha strengthened against the United States dollar on Friday but still ended the week with its third consecutive weekly loss as demand for foreign currency continued to outstrip supply.

Bloomberg report showed the local currency appreciated by 0.27 percent to close just below K19.14 per US dollar after recovering from weaker levels recorded during intraday trading.

Despite Friday’s gains, the Kwacha was unable to erase losses accumulated earlier in the week, with sustained demand for hard currency weighing on the local unit.

Read more: Kwacha joins Africa’s weakest currencies in August despite stronger bond market

“The exchange rate between the South African rand and the kwacha remained largely unchanged on Friday at just below 1.20,” it stated.

However, the currency pair posted a weekly gain of nearly two percent, indicating the rand strengthened against the kwacha over the course of the week.

Meanwhile, analysts expect the US dollar to remain supported in the near term following stronger-than-expected US employment data for August, which has reinforced expectations that the US Federal Reserve could raise interest rates later this month.

The Bloomberg Dollar Spot Index was little changed at the start of the week after advancing on Friday, with resilient US jobs growth, higher energy prices and expectations of firm inflation data continuing to underpin the greenback.

Analysts noted, however, that further gains for the dollar could be capped by renewed strength in the Japanese yen and uncertainty surrounding US fiscal policy and the Treasury market.

They added that while the balance of risks currently favours modest dollar appreciation, particularly against currencies backed by less aggressive central banks, higher long-term US bond yields could trigger policy intervention or reignite concerns over the US fiscal outlook, limiting the dollar’s upward momentum.

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