Exchange Rate Analysis
The Month of March has been a turbulent month for the
Zambian Kwacha against the Dollar. As can be seen from the graph there has been
a general upward trend in the rate the whole month. Notice the trend began on
the 13 of March 2013.All things remaining equal, we could possibly see the
Dollar reach levels of K5.5 for selling and K5.4 for buying.
The most logical explanations for the exchange rate behavior
can both be attributed to the Mines and macroeconomic factors.
Firstly, the Mines prior to the recent statutory instrument
introduced by the Honorable Finance minister where allowed to take profits from
Mining operations outside of the country. This created a high demand for dollar
because borrowing in US currency became expensive. As with any statutory
instrument there is an implementation lag which may take up to as much as 6
months before we begin to see the effect of this instrument.
Secondly, the price of Copper per tonne has fallen to levels
of around $7,000. This has been due to weaker PMI (China’s Manufacturing Index)
numbers from China.
Stronger figures both from the housing market and growth
numbers has renewed optimism in the US Economy. Some of the trend we see in the
exchange rate is due to macroeconomic factors out of Zambia’s control.
Global Economics
As for speculation as to whether the Cyprus Financial Crisis
in Europe was going to affect Zambia it’s unlikely. On Monday the Euro zone in
conjunction with Troika managed to salvage a deal that will treat the two main Banks
in Cyprus that were trashed because of the restructuring of Greece’s sovereign
debt. Cyprus banks held Greek Bonds. IMF Managing director Christine Lagarde
outlined this plan to prevent contagion spreading to Europe’s periphery.
Disclaimer: Derivations based on Fundamental Speculation.
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