Maravi

BoZ intends to make all banks trade in forex

BoZ intends to make all banks trade in forex
Written by Chiwoyu Sinyangwe
Wednesday,October 29, 2008 3:47:11 PM

The kwacha has continued to come under pressure on the foreign exchange market depreciating to K4, 430 and K4, 470 per US dollar as extreme volatility continues to characterise the market.

And Bank of Zambia (BoZ) has said it would soon introduce a regulation to compel all commercial banks to be primary dealers in the foreign exchange market, a move aimed at helping perfect the market.

According to the Citibank Zambia daily market commentary, few corporates were selling US dollar in the market, as traders protect their offer side of dollars.

“The kwacha has continued to be bearish in trading, driven on thin flows as demand outstrips the supply of dollars in the market.

Few corporates were on hand selling US dollar in the market as traders protect their offer side of dollars,” stated the commentary. “Interbank opened at K 4, 350 and K 4,400 per US dollar on Thursday, before depreciating to close at K4, 430 and K 4, 470 per US dollar.”

And Citibank observed that with declining copper prices weighing heavy on the local currency, the kwacha would continue to be bearish with bouts of volatility expected in intraday activity.

“The local currency was as by mid-morning yesterday trading at K4, 540 and K4, 590 per US dollar amidst a volatile morning session in trading,” the report stated in part.

And BoZ governor Dr Caleb Fundanga said although the Central bank would continue to keep liberalised exchange system, it would occasionally intervene in instances of extreme volatility.

Dr Fundanga also said although the current estimated foreign exchange reserves of about US$1.3 billion put BoZ in a stronger position to apply its intervention in the local foreign exchange market, the Central bank would prioritise transparency between itself and the market players.

“Our role is just to ensure that we reduce the volatility in the market to help the business community to plan properly,” said Dr Fundanga.

“We introduced the interbank market in the foreign exchange in 2003, but since that time, we have been trying to perfect the market, improve market information and now we are going to a situation where we want all banks to be primary dealers as opposed to the situation where some of them were primary dealers and others were not.

Labels: BOZ, FOREX

posted by MrK @ 3:48 PM