An Economist says the Kwacha is expected to remain stable this week, although with a slight weaker bias, supported largely by Bank of Zambia’s continued presence on the foreign exchange market.
The US Dollar is currently buying at Twenty-Two Kwacha Ninety Five Ngwee and selling at Twenty-Three Kwacha Twenty Nine Ngwee.
Speaking in an interview with Money News, Misozi Phiri said the relative stability is due to the Central Bank’s interventions aimed at cushioning the local currency.
“The stability is because of the Bank of Zambia’s support towards the local currency on the foreign exchange market,” she explained.
She noted that the Kwacha depreciated last week, prompting the Central Bank to step in and stabilize the currency.
“Last week the Kwacha depreciated and this prompted the Bank of Zambia to enter the market and stabilize the currency. So, the Kwacha will trade stable this week with a slight depreciation if the Central Bank’s support is maintained,” Ms. Phiri added.
Ms. Phiri further pointed out that favourable buying rates tend to attract more market players, increasing pressure on the Kwacha.
She added that exchange rate expectations also influence market behaviour.
“When the Kwacha depreciates, a lot of players wait to see the direction of the exchange rate. And when the Kwacha starts gaining, everyone comes into the market to take advantage of the favourable buying rates,” she said.
Ms. Phiri stressed that this increased participation pushes up demand, which in turn exerts downward pressure on the Kwacha.
“The more people take advantage of the favourable buying rates, the demand increases, causing the Kwacha to depreciate,”Ms. Phiri noted.
