Here is what the week beginning the 22 December is forecast to look like:
KWACHA BULLS. The copper currency is expected to maintain its rally steam after a bullish streak that saw a 6.7% firming up on Friday 20 December. A few dollar conversions are expected from players long dollars looking to raise Kwacha funding to meet salary obligations ahead of the festivities. However the rally steam is forecast to far but the local currency will be supported by suppressed activity given that most corporates have gone on industrial break and there are no pockets of dollar demand for either energy or agricultural funding. The Kwacha is expected to trade between 13.25-13.45 in the week for a unit of dollar. Zambia’s markets will be closed on December 25 as they join the rest of the world celebrating Christmas Day but will be open on 26 December because Boxing Day is not a holiday in Africa’s copper producer.
FIXED INCOME BEARS. The Bank of Zambia will have its last bond auction of the year with a yard on offer. Given the new cash reserve requirement effected on Monday 23 December it is highly unlikely that this fixed income sale will have adequate purchasing power given that K1.6billion will be mopped from circulation on Monday. A 50-55% subscription is projected with potential latitude for yields to edge higher for some tenors as players price in the ‘CCC’ affirmation of Zambia’s long term issuer rating on foreign currency ratings by Fitch. Pensions funds are expected to take interest in this debt sale.
INFLATION TO EBB HIGHER. December inflation is expected to jump higher crossing the 12% mark as November and December currency depreciation lagged effects price into the consumer price index. Last printed at 10.8%, Zambia Statistics Agency (ZSA) has not accounted for the steep currency slide effects which are expected to reflect in this Thursday’s readings.
The Kwacha Arbitrageur
