Zambia’s kwacha weakened the most in 3 1/2 years as investors bought dollars before the local currency is rebased on Jan. 1, with three zeros being removed.
The currency of Africa’s biggest copper producer slumped as much as 4.9 percent, the biggest intraday drop since May 2009 to 5,153 per dollar and traded 4 percent weaker at 5,110 by 12:25 p.m. in the capital, Lusaka, making it the worst performer among all currencies today, according to data compiled by Bloomberg.
“The only game in town right now is the one called currency rebasing,” Charles Mate, managing director of Lusaka- based Stockbrokers Zambia Ltd., said by phone. “A number of players in the market are presumably converting their kwacha into foreign currency” to reduce risk in the run-up to the rebasing, and will take a “wait-and-see approach” in January, he said.
The kwacha gained 6.7 percent in the three days through Dec. 24, making it the best performer for the period, after the Bank of Zambia tightening the overnight foreign-currency positions local lenders can hold. The central bank had also been selling dollars in a bid to strengthen the kwacha, Mwewa Kyamulanda, a currency trader with Investrust Bank Plc (INVESTRU), said in a Dec. 24 interview.
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