Zambia Kwacha World’s Worst Performer as Miners Withhold Dollars
Zambia’s kwacha retreated for a third day, reaching the lowest in almost four years, amid speculation mining companies refrained from selling dollars in the market.
The currency of Africa’s biggest copper producer fell 0.5 percent to 5.3772 a dollar as of 4:23 p.m. in Lusaka, the capital, the lowest level since May 2009. The kwacha has retreated 2.9 percent in the past three days, the worst performance of all currencies tracked by Bloomberg.
Mining companies, the source of almost 80 percent of Zambia’s foreign earnings, are the biggest suppliers of dollars, the currency in which copper is globally traded. Higher demand for the U.S. currency from the manufacturing, telecommunications and energy industries is being countered with lower supply from copper producers, according to Stanley Tamele, head of global markets at Standard Chartered Plc (STAN)’s Zambian unit.
“A good number of them have good balances of local currency so there is no need for them to be selling dollars,” he said in a phone interview today.
The kwacha will probably strengthen to 5.30 if the Bank of Zambia intervenes, Nema Ramkhelawan-Bhana, a Johannesburg-based Africa strategist at FirstRand Ltd. (FSR)’s Rand Merchant Bank unit, said by phone.
“You will see strengthening in the short term,” she said. “The central banks wants to keep the kwacha focused and centered on that 5.30 level.”
Emmanuel Pamu, economics director for the central bank, declined to comment on any specific action taken.
“We intervene in line with our policy, which is to smooth fluctuations in the exchange rate,” he said by phone from Lusaka. The central bank will intervene “either way” if the kwacha appreciates or depreciates sharply, he said.
Zambia’s central statistics office is scheduled to announce the January inflation figure tomorrow, after prices accelerated 7.3 percent in December, the fastest in a year. A weaker currency puts further pressure on inflation, as the land-locked country imports goods from road-building equipment to fertilizers.
The kwacha will probably strengthen over 2013 as Zambia’s copper production grows, ending the year at 4.80 to the dollar, Nema Ramkhelawan-Bhana said.
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