Malawi Kwacha to remain stable

Post was last updated: March 14, 2017

Alliance Capital Limited has forecast that the kwacha will remain stable in the coming months albeit with a downward bias.

The prediction is premised on persistent weak demand conditions on the market and the onset of the tobacco marketing season which will see hoarders diluting their foreign exchange.

“We should see marginal demand pressures ensue. However, these will be moderated by Open Market Operations. Therefore, we expect the kwacha to remain stable against the dollar in the short term however with a downward bias,” Alliance Capital said in a statement released over the weekend.

Statistics show the kwacha exhibited mixed movements against major trading currencies except the US dollar in the month of February.

It depreciated against the South African Rand and wavered against the Pound Sterling driven by global developments but remained stable against the US dollar.

The local unit opened the month at K724.61 to the dollar and closed the month on the same spot. It opened the month trading at K910.88 to one British Pound.

However, on the second day of the month after The Bank of England announced its decision to maintain the bank rate at 0.25 percent, the kwacha moved from K906.98 to K918.67 to the pound owing to interplays on the global market but quickly recovered the losses.

“The kwacha-sterling pair has experienced a spate of volatilities as the UK government is yet to come up with a solid policy direction regarding Brexit. After opening the month at a rather flat rate, the Rand advanced strong within the month against all major global currencies, hitting the kwacha hard in the process,” the statement said.

Meanwhile, forex reserves declined to average $599.59 million, representing 2.89 month of imports, from last month’s $609.55 million.

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