The Malawi Kwacha (MWK) will marginally depreciate by 2.68 percent today, from K1,036 to the United States (US) dollar to K1,063.86, The Daily Times has established.
This follows the second forex auction that the Reserve Bank of Malawi (RBM) conducted on Monday.
But analysts have described the magnitude of the depreciation as very small, with the Kwacha now selling at an average of K1,600 to the US dollar in foreign exchange bureaux.
In a letter to authorised dealer banks (ADBs) Tuesday, RBM Governor Wilson Banda described the forex auction as successful, saying all ADBs participated.
“As per the bank’s communication from 12th January 2023 on foreign exchange auctions, these auctions will determine the market clearing price of the Malawi Kwacha against the United States Dollar (USD) and other major currencies.
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“In this regard, please be advised that, effective tomorrow, 21 June 2023, the maximum selling price shall be MWK1,063.86 per USD1. Please be reminded that all foreign currencies should be priced according to the 2019 Guidelines for Foreign Exchange Trading Activities,” Banda said.
The setup of the forex auction is that ADBs must bid to sell foreign exchange to the central bank at prices or exchange rates freely determined by each participating bank.
The bids are supposed to be for a minimum of $50,000 and in multiples of $10,000 thereafter.
But a Zomba-based economist yesterday doubted as to whether the ADBs really proposed the K1,063.86 rate.
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“Maybe we need to see the bids but I very much doubt the rate,” he said.
Financial Market Dealers Association President Leslie Fatch Tuesday said it was good news to see that the second forex auction was successful, considering that the results of the initial auction conducted in January were nullified.
“The central bank has remained true to the promise of using the auction to find market clearing price for the Kwacha. This helps the price to respond to demand and supply forces. So, this approach allows the currency to be responsive.
“We hope that alignments due to the auctions will help the market align the rates between the formal and informal market,” Fatch said.
