Kwacha Extends Losses Amid Sustained Dollar Demand and Liquidity Constraints!

The Zambian kwacha continued its downward trajectory on Tuesday this week, marking its ninth consecutive session of losses against the US dollar.

Although the depreciation was relatively modest at 0.12%, according to Bloomberg data, it reflects a persistent weakening trend that shows little sign of reversal in the near term.

During intraday trade, the kwacha briefly breached the psychological resistance level of 24.200/USD, driven by temporary shifts in demand-supply flows.

However, the local unit was unable to hold onto those gains and eventually closed just below that level, underlining the fragility of any short-term recoveries.

The ongoing pressure on the kwacha is being fueled primarily by structural liquidity shortages in the domestic market, as well as heightened demand for foreign exchange from corporates.

Dollar demand remains elevated due to a mix of import requirements, profit repatriation, and hedging activities all taking place in an environment where hard currency supply remains constrained.

Furthermore, the lack of meaningful forex inflows particularly from key sources such as mining exports, donor support, or foreign investment continues to tilt the balance against the kwacha.

Without intervention or a marked improvement in USD supply, the current imbalance is likely to persist, maintaining depreciation pressure on the currency.