Kwacha to gain 3.1% against Dollar this quarter-Stanchart

Zambia’s kwacha will gain 3.1 percent versus the dollar by the end of the first quarter as improved copper prices boost the southern African country’s export revenue, according to Standard Chartered Plc.

The U.K.-based bank raised its end of first-quarter kwacha estimate to 4,300 per dollar from a previous forecast of 4,700 according to an e-mailed note to clients dated today. The currency traded 0.3 percent stronger at 4,420 per dollar as of 2:03 p.m. in the capital, Lusaka, from 4,435 late yesterday.

“The powerful upswing in copper prices is beginning to translate into higher earnings and remittances for Zambia,” Robert Minikin, a senior currency strategist at Standard Chartered, said by telephone. “That underlines our improved profile for modest short-term strength in the kwacha.”

Copper has rallied almost 145 percent since the start of last year on speculation demand for the metal used in electrical wiring will gain as manufacturing recovers in China, Europe and the U.S. Shipments of the metal account for almost 75 percent of Zambia’s export earnings and about 30 percent of the country’s gross domestic product, Standard Chartered estimates.

“The Zambian economy is the most reliant on dynamics in the copper market,” said Minikin.

Zambia’s export earnings from copper rose 4.4 percent in the fourth quarter to $984.6 million from $943 million in the previous three months, Bank of Zambia Governor Caleb Fundanga told reporters in Lusaka today. The country’s economy may expand by more than 7 percent this year due to rising prices for the metal, he said on Jan. 4.

Power Shortage

The kwacha may give up gains in the final three quarters of the 2010 as a shortage of power supply interrupts copper production and “introduces some event risk” for the currency, said Minikin. The currency is likely to slide to 4,450 by end- June and reach 4,400 by end-September before weakening to 4,600 by year-end, Chartered predicts.

Zambia faces rationing of electricity later this year due to increased power demand from mines, Reuters reported Nov. 23, citing Timothy Lungu, acting generation and transmission director for state power utility Zesco Ltd.

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