Zambian Kwacha Best Performer as Central Bank Supports Currency

Zambia’s kwacha strengthened the most in more than a year as the central bank was said to support the currency of Africa’s biggest copper producer.

The kwacha appreciated 3.8 percent, the most since September 2011, to 4,930 a dollar as of 3:57 p.m. in Lusaka, the capital. That’s the best performance among all currencies tracked by Bloomberg. The currency has advanced 6.3 percent in the past three days.

The Bank of Zambia last week reduced the amount of foreign currencies local banks are allowed to hold. Rising food prices and a weaker currency have fueled inflation, which climbed to 6.9 percent in November. The central bank has been “aggressively extending the kwacha” by selling dollars in the market, Mwewa Kyamulanda, a currency trader with Investrust Bank Plc (INVESTRU), said by phone from Lusaka.

“Politically, a strong kwacha is viewed as positive,” Kyamulanda said. “The guy on the street is largely an importer and the exchange rate drives inflation.”

Kanguya Mayondi, a spokesman for the central bank, declined to comment when contacted by Bloomberg News.

The government also wants to strengthen the kwacha in the run-up to the Jan. 1 rebasing exercise, which removes three zeros from the currency, Joseph Lungu, a Lusaka-based analyst with Intermarket Securities Ltd., said by phone.

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