Zambia’s kwacha rose to a near six-week 6 high against the dollar on Wednesday, after companies exchanged greenbacks for the local currency to meet quarterly tax payments and the copper price firmed.
The metal’s price hit an 8-week high with investors betting on more global stimulus measures after Britain’s shock vote to leave the European Union, extending gains for Africa’s No. 2 copper producer’s currency.
The kwacha reached a session high of 10.2100 per dollar before pulling back to 10.4000 by 0814 GMT in volatile trade, but was still up 3.17 percent from Tuesday’s close.
Traders said company tax was due on July 14.
“Firms are buying kwacha to comply with quarterly tax obligations on top of the usual salary payments at month-end,” said NKC Economics southern Africa analyst Irmgard Erasmus.
The kwacha was also supported by the copper price that was more resilient to the results of the Brexit vote than expected, said Erasmus.
Some traders said the kwacha was also buoyed by a shortage of the local currency.
“Apart from dollar conversions by companies preparing to pay month-end obligations, the kwacha is also getting support from the central bank’s open market operations which entail reducing the amount of kwacha in circulation,” independent financial analyst Maambo Hamaundu said.