HAMAUNDU PREDICTS KWACHA STABILITY THE country should expect to see a fairly stable rate of exchange following the turbulence it experienced in recent weeks, says financial analyst Maambo Hamaundu. The Kwacha has continued to appreciate and could this week trade below K6.20 against the US dollar as exporters take advantage of the higher levels. The Kwacha, which remained on the back foot since last quarter of 2013, resurged this month and gained by 9.6 per cent this month alone following BoZs intervention to make the local currency expensive by tightening liquidity as well as injecting some foreign currency in the market to stabilise supply. In an interview, Hamaundu said there was need for finance minister Alexander Chikwanda and Bank of Zambia governor Dr Michael Gondwe to continue building confidence in the Zambian economy to sustain recent gains by kwacha. Hamaundu projected the local currency to stabilise around K6.30 and K6.40 for bid and offer, with a bias towards appreciation. I am hoping that we will see a fairly stable rate of exchange now following the turbulence that we had experienced in the last three or so weeks, Hamaundu said in an interview. I am seeing the Kwacha almost settling at about K6.30 and K6.40 and I know the last couple of weeks, there was intervention from the Bank of Zambia but now I am just hoping the Kwacha will settle and my desire will be for the people running the economy to continue speaking and building confidence because what has been lacking over a long period of time is the question of confidence. He said the recent turbulence in the Kwacha market had not only hurt every sector of the economy, disturbing peoples daily lives. If they dont continue building the confidence, the kwacha might go back to volatility that led to its depreciating, said Hamaundu. It is very important that the process of confidence is enhanced. If stability and confidence in the economy is attained, then the business community will respond positively but in the absence of stability and confidence, its a bit difficult as many people will be making ad hoc decisions. Hamaundu said increased intervention by BoZ through monetary policy decision helped to halt the Kwacha fall which threatened inflation in the country. But the key is to build confidence in the market and the economy so that the rate is indeed determined by market forces, said Hamaundu. And FNB-Zambia said the probability of the local unit trading below K6.20 was high, although the unit seemed resistant around K6.20. We have seen demand for the greenback around these levels which has in turn pushed the level up, stated FNB. Nonetheless, we remain biased towards kwacha appreciation. Apart from tightening liquidity levels by raising interest rates to a record to support the currency and tame inflation, BoZ also boosted overnight rates to 10 percentage points above the policy rate from previous six percentage points. On June 2, BoZ deputy governor in charge of administration Dr Tukiya Kankasa-Mabula, in an unprecedented move, announced that the government deposits and vostro account deposits would be included in the computation of statutory reserves. In a May 30 circular to heads of commercial banks operating in the country, Dr Kankasa-Mabula said the government deposits and vostro account deposits would be subjected to statutory reserves at 14 per cent rate in a move aimed at stifling liquidity. postzambia/post-read_article.php?articleId=50335
Posted on: Wed, 18 Jun 2014 04:56:53 +0000
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