The Kwacha yesterday rebounded and became the best performing currency, according to Bloomberg.
It said the Kwacha gained more than 11 per cent, to close at K 12.38 per dollar by 12:04 yesterday afternoon, the biggest advance among more than 150 currencies Bloomberg tracked and most since November 2008.
The currency was rallying for a second day after falling to an all-time low of 14.6050 on Tuesday.
With the central bank’s continued intervention, the Interbank market was ‘‘awash with dollars,” the Lusaka-based Zambia National Commercial Bank Plc said in a note, adding that banks will probably be selling greenbacks after holding them for long periods.
“The kwacha is likely to hold firm against the dollar amid a bullish tone,” it said.
The currency of Africa’s second-biggest copper producer has dropped 48 per cent this year against the dollar as plunging metal prices, a power crisis and widening budget deficit weigh on the economy.
An International Monetary Fund team arrived in Lusaka on Wednesday at the Government’s invitation to discuss “challenges” facing the economy.
President Edgar Lungu’s Government had resisted seeking emergency IMF aid, choosing instead to sell Eurobonds this year to plug the budget shortfall. Ghana agreed to a loan of almost $1 billion with the Washington-based lender earlier this year after its currency, the cedi, slumped 42 percent in the 12 months through March.
The Bank of Zambia has sold $510 million of its foreign exchange reserves since January to support the Kwacha, Mr Emmanuel Pamu, director of financial markets, said on November 3. Gross international reserves were $3.87 billion at the end of July, according to the most recent data from the central bank. The regulator, which lifted its policy rate by a record 3 percentage points on November 3, may soon run out of ammunition to support the currency, forcing the Government to seek IMF aid, according to Rand Merchant Bank.
“The latest talks with IMF representatives are apparently for a pre-scheduled meeting and not directly related to the latest plunge in the currency,” Gareth Brickman, a market analyst at ETM Analytics NA LLC in Stamford, Connecticut, said in an e-mailed note.
“Until further clarity is garnered on this front, extreme caution is advised as the Kwacha’s fundamental fragility is still very high and the risk of foreign-exchange controls still looms large, he said.