Zambia’s Kwacha Gains to Six-Week High as Bank Tightens Limits

Zambia’s kwacha climbed to a six- week high against the dollar, making it the best performer worldwide today, after the central bank cut the amount of foreign currency commercial lenders can expose themselves to.

The currency of Africa’s biggest copper producer added as much as 1.5 percent to 5,123 per dollar, the strongest since Nov. 8, and traded 1.4 percent higher at 5,125 by 5:32 p.m. in Lusaka, the capital. A close at that level would be the strongest since Nov. 2 and would take the kwacha’s gain this week to 2.5 percent, the best performance in the period against the dollar among all currencies monitored by Bloomberg.

The Bank of Zambia reduced the overall overnight foreign- currency risk exposure limit to 15 percent of total regulatory capital from the previous cap of 25 percent, starting yesterday, it said in a circular dated yesterday. The lender also halved the single foreign-currency risk exposure limit to 10 percent. Banks have a five-day grace period to clear excess exposures, it said.

Some banks in the country “may have had to shed some of their positions” in foreign currency because of the tighter restrictions, Mwewa Kyamulanda, a Lusaka-based currency trader with Investrust Bank Plc (INVESTRU), said by phone. “I also hear the central bank intervened with the sale of U.S. dollars.”

The Bank of Zambia did not immediately respond to e-mailed questions seeking comment.

The bank put a limit on the interest rate commercial lenders can charge of 18.25 percent, it said separately today. The average interest rate is 16.3 percent, according to the Bankers Association of Zambia. The central bank set its policy rate at 9.25 percent on Nov. 30.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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