News / Africa
Kwacha falls to a 12-month low after Mugabe's disciple wins in Zambia
23 Sep 2011 at 09:33hrs | Views
Zambia's kwacha fell to a 12-month low of 5,030 against the dollar on Friday after opposition leader Michael Sata, a fierce critic of foreign mining investment, especially from China, won a surprise election victory.
Traders said the currency of Africa's biggest copper producer was likely to remain on the back foot until Sata provided clarity on his economic policies.
He told Reuters last week he would maintain strong commercial and diplomatic ties with China and would not introduce a minerals windfall tax. He also implied he might impose some form of capital controls to keep dollars in the country.
"Right now there's a bit of uncertainty about what changes in policy we're going to see with Sata," said Coura Fall, an Africa analyst at Citi in Johannesburg.
"The kwacha will continue to be vulnerable, at least until there's clarity about what's going to happen. Everybody is trying to see what Sata is really about."
Other factors weighing on the kwacha are a 17 percent decline in the last three weeks in the price of copper, which accounts for 80 percent of Zambia's export revenue, and the more general global flight from risky emerging and frontier market assets.
Sata is due to be sworn in on Friday, only hours after the declaration of his election victory over incumbent Rupiah Banda, whose Movement for Multi-party Democracy had run the southern African country since the end of one-party rule in 1991.
Traders said the currency of Africa's biggest copper producer was likely to remain on the back foot until Sata provided clarity on his economic policies.
He told Reuters last week he would maintain strong commercial and diplomatic ties with China and would not introduce a minerals windfall tax. He also implied he might impose some form of capital controls to keep dollars in the country.
"Right now there's a bit of uncertainty about what changes in policy we're going to see with Sata," said Coura Fall, an Africa analyst at Citi in Johannesburg.
"The kwacha will continue to be vulnerable, at least until there's clarity about what's going to happen. Everybody is trying to see what Sata is really about."
Other factors weighing on the kwacha are a 17 percent decline in the last three weeks in the price of copper, which accounts for 80 percent of Zambia's export revenue, and the more general global flight from risky emerging and frontier market assets.
Sata is due to be sworn in on Friday, only hours after the declaration of his election victory over incumbent Rupiah Banda, whose Movement for Multi-party Democracy had run the southern African country since the end of one-party rule in 1991.
Source - Reuters
