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Kwacha falls against US dollar, other units

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Lauryn Nyasulu

The Malawi Kwacha has started the year on a low note, depreciating against major trading currencies in the first six weeks.

Our calculations show that between January 1 and February 19, the local unit depreciated by 3.5 percent against the British Pound, by 0.7 percent against the United States (US) dollar and by 8 percent against the South African Rand.

However, the local unit appreciated against the Euro by 0.7 percent.

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Experts attribute the fall of the Kwacha to increased demand for foreign currencies as the country is at the peak of its lean season.

However, Reserve Bank of Malawi spokesperson Onelie Nkuna said the Kwacha exchange rate is flexible and its movements reflect market trends.

“Indeed, since end December 2020, the Kwacha exchange rate has depreciated by 1.3 percent against the US dollar and traded at K783.12 per dollar as at February 18 2021. The marginal depreciation of the Kwacha against the US dollar during this period reflected seasonal imbalances of demand and supply on the market.

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“Similarly, the kwacha depreciated by 3.4 percent and 0.7 percent, against the British Pound and the euro, respectively, to trade at K1131.05 per Pound and K999.99 per Euro. This development was due to strengthening of the Pound and Euro, against other hard currencies, in the main, driven by positive prospects surrounding Brexit coupled with optimistic Covid vaccine developments,” Nkuna said.

She said the central bank expects movements in the Kwacha exchange rate to continue reflecting developments on both domestic and international fronts.

Economics Association of Malawi President Lauryn Nyasulu said the weakening of the Kwacha is a reflection of demand and supply conditions of forex in the market.

“The Kwacha may remain relatively weak in the very short term but may regain once the export proceeds start flowing in the next few months,” Nyasulu said.

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