Zambia’s kwacha weakened in the world’s worst decline against the dollar today as a shortage of foreign exchange pushed the currency of Africa’s second-biggest copper producer to a record low, reports USA headquartered Bloomberg news agency.
The kwacha, the continent’s worst performer this year after Ghana’s cedi, has come under pressure from deficits on the southern African nation’s current and capital accounts, Fitch Ratings said in a note today. The selloff will probably continue, according to Zambia National Commercial Bank Plc.
“Strong interbank and corporate demand amid thinning dollar supply are most likely to keep the kwacha on the back foot,” Lusaka-based analysts, including Virginia Mwalilino, wrote in a note today.
The kwacha dropped as much as 2.1 percent, the biggest intraday fall since March 27, and traded 1.6 percent weaker at 6.6550 per dollar by 5:33 p.m. in Lusaka, a record low and the worst today among 172 global currencies tracked by Bloomberg.
A weaker kwacha leads to higher costs of imports including oil, adding pressure on the inflation rate, which climbed to 7.8 percent in April the highest since November 2011. The Bank of Zambia raised its benchmark rate to 12 percent from 10.25 percent in March and held it at a record high this month.
Yields on Zambia’s Eurobonds sold last month and due in April 2024 fell for a third day to 7.51 percent, one percentage point less than the coupon, and a record low. Proceeds from the $1 billion dollar debt may help take pressure off the government’s deficits, Fitch analysts including Carmen Altenkirch wrote.
Courtesy of Bloomberg