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Kwacha’s mixed fortunes

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The Kwacha has marginally weakened against the British pound and the South African rand over the past two months despite being steady against the United States dollar, The Daily Times has established.

The kwacha weakened by 3.5 percent against the pound from K990 on December 4, and was recorded at K1,025 on Tuesday, better than the K1,037 seen on Monday.

This should be a cause of concern for international students paying their examination and registration fees in pounds as they will have to cough more kwacha. On the other hand, this should bring some joy to businesses which export their merchandise to the UK, as they will earn more kwacha.

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But Reserve Bank of Malawi (RBM) has attributed the weakening of the kwacha against the pound to the relationship between the dollar and pound.

RBM spokesperson, Mbane Ngwira, said, in recent weeks, currencies have been appreciating against the dollar.

“It is an arithmetic thing. Every country calculates its exchange rate against the dollar. For all the other currencies, you calculate cross rates. Now the kwacha is stable against the US dollar, therefore, the rate between the kwacha, GBP and rand will be determined by how the GBP or rand is fairing against the dollar.

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“Of late, these currencies have been appreciating against the dollar due to internal economic performance. Since the kwacha is stable against the US dollar and as the dollar is depreciating against the other currencies, the kwacha will follow suit,” Ngwira said.

As at the start of business on Tuesday, the dollar was trading at K733.95. The dollar slipped on Tuesday after earlier gains, when investors had dumped riskier assets for the relative safety of the greenback, but currency to markets were generally calm compared with the rout in equity markets.

The sell-off across world stock markets sent investors rushing into the dollar on Monday, helping the US currency perform well against the euro, British pound and commodity-linked currencies.

But in early European trading on Tuesday, the dollar gave back some of those gains, with currency markets not showing the sort of panic movements seen in other asset classes.

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