Dollar scarcity deepens in Zambian market...

The Zambian financial markets have continued to trade thin with dollar scarcity compounding. A check at the key commercial banks on Friday 06 October, dollar trading was muted with some banks not trading at all. ( Thin markets are ones where trading is close to impossible due..

BOZ watches the market closely for trader market discipline The Zambian financial markets have continued to trade thin with dollar scarcity compounding. A check at the key commercial banks on Friday 06 October, dollar trading was muted with some banks not trading at all. ( Thin markets are ones where trading is close to impossible due to non-availability of currency on one hand). The market is thin dollars to the extent that any supply that shoals is rapidly absorbed. The kwacha closed Friday at K11.89/USD a level weaker than the appreciation recorded of K11.40/USD on account of some dollar conversions to Kwacha by players in readiness for the tax season.

The Central Bank has kept a tight grip on market monitoring to ensure market discipline in light of the recent depreciation of the local unit which has adversely impacted business houses. It is expected that dollar conversions to fund kwacha tax obligations will give temporal support in the immediate term. However, currency pressure remains high in light of the current economic sentiment that has dwindled significantly coupled with a strong dollar environment that has fuelled a green back fetish.

Zambia’s currency pressure has transmitted to the money markets which is currently pricing primary market treasury bills above 20% in the one year as offshores price these assets 500-700bps higher in the secondary market.

The kwacha recorded a steep one-day jump of 6.45% last week on Tuesday 02 October on the back of dollar sales by some corporates. The Kwacha has started to reverse most of the gains as dollar demands persists.