Maravi

Renaissance explain kwacha depreciation

Renaissance explain kwacha depreciation
Written by Chiwoyu Sinyangwe
Tuesday, April 28, 2009 3:48:45 PM

THE lag in the currency and trade balance adjustments delays the kwacha from benefiting from any immediate upturn in international copper prices, according to Renaissance capital.

And Finance Bank has observed that the local currency is yet to respond to the recent improvement in world economic outlook which has seen a rally in global markets and commodity prices.

Meanwhile, the kwacha went on to close the week at K5, 640 and K5, 660 levels, appreciating by about 0.7 per cent last week.

Renaissance Capital, which is Pangaea Renaissance Securities Limited’s parent company, has predicted that the impact of the current rebound in international copper prices on the local currency would only be felt after June this year.

The investment advisors explained that expectation in the country was that the kwacha should recover back given the increase in copper prices but there seemed to be a two to three month lag to volumes mined and shipped out to the copper prices, stating that this resulted in delayed impact on the local currency.

“Nobody knows for sure what the future holds or if it is only copper prices that influence the exchange rate but based on past trends, this has been the correlation between the kwacha and Copper prices,” explained Pangaea Renaissance Securities.

And according to the Finance Bank weekly Treasury Market update, copper prices have this year gone up by about 40 per cent, although that price movement was yet to impact on the performance of the local currency.

“This week, we expect a stable to bullish kwacha as the month comes to a close with the resultant corporate conversions for month end obligations,” stated Finance Bank.

Labels: INFLATION, KWACHA, PANGAEA RENAISSANCE SECURITIES

posted by MrK @ 2:50 PM