Maravi

Forex analyst warns of kwacha decline

Forex analyst warns of kwacha decline
Written by Florence Bupe
Friday, September 04, 2009 5:08:02 PM

A FOREIGN exchange market analyst has urged caution on the prospects of the kwacha as there is likely to be an upturn in dollar demand during the last quarter of this year.

According to a foreign exchange alert released by Standard Chartered Bank titled ‘The great moderation in African foreign exchange’, an analysis conducted by Stanchart UK senior foreign exchange strategist, Robert Minikin, warned of a possible slump in copper prices, a situation which could impact on the performance of the kwacha, considering Zambia’s economic exposure to the copper market.

“Given the powerful surge in copper prices, it is perhaps unsurprising that the Zambian kwacha has traded with a firmer tone in recent months. We remain cautious on the unit’s near term prospects as there is a seasonal upturn in demand for US dollars in the fourth quarter, while our commodity team warns that copper could suffer a setback as prices are stretched a long way above the cost of production,” he warned.

He observed that the reopening of some commodity export markets and the improvement of other commodity prices had greatly helped in the recovery of currencies.

“Encouragingly, some commodity export markets have now reopened, such as that for diamonds, while some commodity prices are now substantially above the levels which seemed likely just a few months ago, notably copper, helping the Zambian kwacha,” he stated.

Minikin further indicated that the powerful foreign exchange cycles over the last five years were expected to give way to more orderly trading conditions.

Labels: FOREX, KWACHA, STANCHART

posted by MrK @ 4:10 PM