5 February 2013

Zambia: Kwacha Bullish As Copper Gains

THE close of the money market trading on Friday saw the Kwacha trade relatively bullish against the United States (US) dollar.

According to the Zanaco Treasury Newsletter, the Kwacha opened interbank trading at between KR5.390 and KR5.410 on the bid and offer respectively and traded flat for much of the morning session.

However, strong selling by offshore players helped the Kwacha rally to touch a session peak of trading at between KR5.350 and KR 5.370 before closing off the week at KR5.360 and KR5.380

In the near term, the Kwacha is expected to hold steady against the dollar and should trade between KR5.300 and KR5.400 on the inter-bank market.

Zanaco money markets analysts said liquidity levels in the money market edged downwards on Friday to close the day at KR2, 036.10 million from the previous day's KR2, 112.80 million.

Analysts observed that the volume of interbank funds traded also went down to KR98.50 million from KR172.0 million, as interest by market players for interbank funds reduced.

The weighted average overnight interbank lending rate dropped to 7.65 per cent from the previous day's 8.0 per cent.

After being out of the market for a while, Bank of Zambia was in the market through the open market operation both in the morning and afternoon sessions looking to withdraw a total of KR700 million but however only managed to siphon KR350 million.

Meanwhile the prices of copper and oil on the world market rose to the highest level recorded over a four-months period.

Copper prices on the London Metal Exchange (LME) rose on Friday to hold near four-month highs struck the session before after China's factory output grew in January, bolstering confidence in a global economic recovery.

According to Reuters , three-month copper prices on the world metals market climbed by 0.45 per cent to $8,202 a tonne, reversing losses from the previous session when it retreated after hitting the highest in nearly four months.

Brent crude prices rose to a four-month peak at the close of trading last week , with traders citing optimism about the global economic recovery, while Brent's premium over US oil futures widened nearly $1 a barrel in heavy spread trading.

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