Zambian Kwacha Expected to Weaken

The kwacha is expected to soften next week due to a strengthening of the dollar against other currencies and its long-term prospects are bleak given waning offshore investor interest in Zambian assets.

Commercial banks quoted the currency of Africa’s top copper producer at 5.380 to the dollar on Thursday, down from 5.350 last week.

“A breach of 5.400 looks very likely if the Bank of Zambia doesn’t intervene,” one trader said.

Should major dollar sellers hold off in anticipation of a better rate, the weakening of the kwacha would be quick with a possibility of touching 5.420, he said.

Jeff Gable, head of Africa research at Absa Capital, forecast the currency of Africa’s top copper exporter to end the year at 6.000 to the dollar as some of the money earned by exporters is not being remitted back into the country.

Offshore investors also appear to have turned their back on kwacha-denominated assets, he said, in particular government bonds.

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