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The Kwacha depreciated by 3.4 percent against the United States dollar in October, closing the month at K20.37, with Access Bank Group warning that the local currency could weaken further to K21 in November.
The bank attributed the depreciation to reduced foreign exchange supply, increased demand for dollars from importers and declining attractiveness of Kwacha-denominated investments.
In its latest market commentary, Access Bank Group said the Kwacha traded at K20.3724 per dollar at the close of October, after touching K20.3762 on Friday.
Read more: Kwacha extends losing streak to seven consecutive trading sessions
It said the currency’s performance was the third-worst among African currencies during the month, reducing its year-to-date gains to approximately nine percent.
The bank attributed the pressure partly to Zambia recording a US$190 million trade deficit in September, which contributed to reduced foreign exchange supply on the market.
It also cited increased seasonal demand for dollars from importers of fuel and agricultural inputs, coupled with a narrowing real policy interest rate, which stood at approximately 4.45 percent.
Access Bank Group said these factors had weakened the attractiveness of Kwacha-denominated assets to investors, while strong foreign exchange demand and subdued inflows were likely to sustain pressure on the currency in November.
The bank expected the Kwacha to remain under pressure ahead of the presentation of the 2027 National Budget on November 6 and the Bank of Zambia’s Monetary Policy Committee meeting later in the month.
It projected that the local currency could test K21 per dollar, identifying resistance levels at K20.50 and K21, while support levels were expected at K20 and K19.70.
However, the bank said several factors could help cushion the Kwacha against a disorderly depreciation.
These include copper prices remaining above US$14,000 per tonne, Moody’s recent upgrade of Zambia’s sovereign credit rating and the pending approval of the country’s proposed US$1.472 billion International Monetary Fund programme.
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