Zambian Kwacha Extends Slide as Oil Importers Seek Dollars Ray Ndlovu and Mpho Hlakudi The Zambian kwacha fell as much as 6% on Tuesday, its biggest daily drop in more than three years, as corporate demand for dollars weighed on this year’s top-performing African currency. The kwacha weakened to as low as 21 per dollar, its lowest level since January, before ceding most of those losses to trade at 19.84 as of 10:50 a.m. in London. Tuesday marked the sixth straight day of declines for the currency, which, like many emerging-market assets, has come under pressure from a resurgent dollar and high oil prices.
Mutisunge Zulu, chief risk officer at Zambia National Commercial Bank, attributed the latest decline to the expiry of the government’s special currency exemptions for energy importers."There is demand coming from the energy sector," Zulu said. "The depreciation that you are seeing is a reflection of the oil marketing companies looking for dollars to fund petroleum products."Zambian assets have delivered robust returns this year, as Africa’s second biggest copper producer benefited from higher prices for the metal. The kwacha’s appreciation helped propel year-to-date returns on local bonds to 39%, the highest globally. More recently though, the market has faced pressures.
Bloomberg’s dollar index has risen for three straight weeks, while the war in the Middle East has kept crude prices near $100 a barrel."Hard currency demand remains elevated, while the market has not seen sufficient inflows to fully absorb prevailing demand requirements," strategists at First Rand Ltd. in Lusaka said in a note. Other emerging-market currencies are also feeling the strain. The Ugandan shilling touching a record low on Monday, while the Chilean peso and Indian rupee have also weakened, prompting authorities to sell dollars.
Sign up here for the daily Next Africa newsletter and subscribe to the Next Africa podcast on Apple, Spotify or anywhere you listen.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing