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The foreign exchange market experienced significant volatility on Thursday following the US Federal Reserve’s announcement of a 50 basis point rate cut.
Investors spent much of the day recalibrating their expectations for the US economy and future monetary policy moves.
According to Access Bank daily market update, traders made notable adjustments to their positions in both the short and long legs of the dollar trade.
“Lower-than-expected jobless claims also added uncertainty to the mix, with the USD Index fluctuating between highs of 101.47 and lows of 100.51 during the session,” the report stated.
In Zambia, the Kwacha showed brief strength against the US dollar on Thursday.
Data from Bloomberg revealed that the local currency temporarily broke below the 50- and 100-day moving averages of K26.1436 and K26.0431, respectively, but was unable to sustain these moves, closing just under K26.300 per dollar.
Looking ahead, the Kwacha is expected to face renewed pressure next week, driven by increased dollar demand from importers and limited foreign currency supply.
Read More: Kwacha strengthens as increased supply meets foreign exchange demand
Absa Bank’s market update also reflected the Kwacha’s struggles, citing strong corporate demand for US dollars and merchandise imports as the main factors.
Despite starting the day on a positive note with commercial banks quoting the Kwacha at K26.00/26.050, demand soon outpaced available supply.
By midday, the local currency had weakened to K26.150/26.200 on the bid and offer, and by the close of the session, it had dropped to K26.250/26.300—down by 25 ngwee from the opening.
“In the short term, the Kwacha is expected to remain under pressure but could see some support from early salary conversions,” the Absa report concluded.
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