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Zambia’s improving mining performance and prospects for a stronger agricultural harvest are expected to provide medium-term support to the Kwacha, although the local currency will remain exposed to global market developments, Access Bank has said.
In its latest market commentary, the bank said expectations that Zambia would achieve annual copper production of one million tonnes were likely to strengthen export earnings and foreign exchange inflows, boosting demand for the local currency.
“The Zambian Kwacha should continue to derive medium-term support from improving mining fundamentals as expectations of one million tonnes of annual copper production point to stronger export receipts and foreign exchange inflows,” Access Bank said.
The bank also projected that increased agricultural output would help contain food inflation, reinforcing macroeconomic stability.
“Higher agricultural output could also help moderate domestic food inflation, providing an additional anchor for macroeconomic stability,” the lender said.
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Despite the positive outlook, Access Bank warned that the Kwacha’s performance would continue to depend on external factors, particularly movements in global copper prices, the strength of the United States dollar and domestic monetary conditions.
“The currency is likely to remain sensitive to global copper prices, US dollar movements and domestic monetary conditions,” the bank said.
The commentary noted that technical indicators suggest the kwacha has begun recovering from the lows recorded in June.
According to Access Bank, the Relative Strength Index has returned towards neutral territory, while the stochastic oscillator has moved into overbought levels, signalling that recent gains may consolidate before the currency embarks on a more sustained appreciation.
The bank said sustained growth in Zambia’s mining industry, together with improved agricultural performance, would be crucial in supporting the Kwacha over the coming months, provided international market conditions remain favourable.
It added that investors would continue to monitor developments in global commodity markets and the direction of the US dollar, as both remain key drivers of the local currency’s performance in the short to medium term.
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