Financial market anticipates Kwacha rebound

Tue, 20 Feb 2018 11:53:45 +0000

By BUUMBA CHIMBULU

THE financial market is anticipating the likelihood of the Kwacha making a comeback in the short-medium term owing to the coming local bond auction set for February 23 2018.

According to the market, since the last auction in December 2017, bonds rallied on the back of flush liquidity conditions and a tame in inflation outlook.

First National Bank (FNB) Zambia explained that the market saw increased Kwacha selling by the offshore market.

The bank in its daily market news said the currency continues to come under pressure as dollar demand surges.

“The offshore market also looked like net sellers of Zambia bonds, tying into the observed price action in the market. After a break of 9.900, the huge 10.000 becomes the natural target. The march towards the level will be halted if dollar supply volumes go up,” said the bank.

It further said the market was beginning to look like bond yields would tick higher at last Friday’s auction. “Increased in inflation risk, coupled with a drop in market liquidity, is giving treasuries a bearish feel. Un- certainties over the International Monetary Fund deal may also be weighing on the market,” said FNB. And Cavmont Bank Zambia daily market report indicated

that Friday’s trading session saw the Kwacha weaken further following a pickup in demand on the interbank. The bank indicated that the local unit touched an intra-day low of K9.825 / K9.875 from the day’s opening levels of K9.775 / K9.825. “Despite copper trading above US$7,000/metric tonne, the Kwacha is yet to make any significant gains owing to inadequate in flows from sellers,” said Cavmont Bank.