6 February 2013

Zambia: Kwacha Holds On As Copper Prices Fall

MONEY markets on Monday saw the Kwacha open interbank trading on a marginally stronger footing against the dollar, closing Friday's trading at between KR5.350 and KR 5.370.

The local unit posted an intraday marginal gain of One Ngwee to open market at between KR5.40 and KR 5.360 on the bid and offer respectively.

According to the Zanaco Treasury Newsletter, the relatively subdued dollar demand resulted into the Kwacha trading flat on the day and closed trading at between KR5.335 and KR 5355.

Zanaco's money market analysts said the near term should see the Kwacha hold on and possibly record further marginal gains as interbank demand for the dollar ebbs.

Analysts noted that the Kwacha was expected to continue trading range bound between KR5.300 and KR5.400 on the interbank.

The money markets experienced a significant decrease in liquidity on Monday, as it plunged from the high of KR2, 036.10 million recorded on Friday to KR1, 632.50 million.

According to analysts, there was a significant increase in the volume of interbank funds traded rising to KR159 million from KR98 million, while the weighted average interbank lending rate receded to 7.43 per cent from 7.65 per cent.

Bank of Zambia was in the market through its open market operations and offering to draw a total of KR350 million and the total bids received amounted to KR605 million, while only KR350 million was allocated.

Meanwhile, the commodity prices of copper and oil on the world market have fallen.

Metal markets trading on the London Metal Exchange (LME) saw copper prices retreating from four-month peaks as the dollar strengthened, but signs of a credible US recovery and improved factory activity across the globe limited the fall.

According to Reuters, benchmark LME copper was $8,265 per tonne in official rings, after earlier hitting $8,346, the highest level since October 5.

Crude oil fell below $116 per barrel yesterday, slipping from four and half-month highs after three weeks of gains powered by signs of improving global economic growth and concern over geopolitical tension in the Middle East.

Brent fell $1.19 to a low of $115.57 per barrel before recovering slightly to around $115.70 by yesterday, not far off prices, reached a four-and-half month high of $117.07 on Friday.

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