\n Zambia\u2019s kwacha traded close to its strongest level in more than two years after a government directive to curb the use of foreign currencies in domestic transactions triggered a wave of dollar selling.\n <\/p>\n
\n The currency climbed as much as 0.9% against the greenback before paring gains to trade 0.4% higher on the day, extending last year\u2019s rally that was fuelled by surging copper prices, according to Bloomberg.The kwacha has strengthened more than 2% this week alone.\n <\/p>\n
\n The latest appreciation reflects a sharp rise in foreign-exchange supply driven by what Chipo Shimoomba, a treasury dealer at First Alliance Bank in Lusaka, described as \u201cpanic selling\u201d of dollars following the government\u2019s de-dollarisation push.\n <\/p>\n
\n In December, the Bank of Zambia instructed market participants to settle all domestic transactions in local currency, thereby reinforcing the kwacha\u2019s status as legal tender.\n <\/p>\n
\n The directive has accelerated the liquidation of dollar holdings, creating a bullish short-term outlook for the currency.\n <\/p>\n
\n Demand for dollars has also eased as factories across Zambia shut down for the Christmas break and are only due to resume operations next week, temporarily reducing import-related currency needs.\n <\/p>\n
Copper windfall lifts inflows<\/p>\n
\n Zambia, the continent\u2019s second-largest copper producer after the Democratic Republic of Congo, benefited from record-high copper prices, which boosted export revenues and foreign inflows.\n <\/p>\n
\n The Lusaka Stock Exchange also delivered some of the strongest returns in emerging markets in both local and dollar terms.\n <\/p>\n
\n Beyond commodity gains, President Hakainde Hichilema\u2019s progress on restructuring Zambia\u2019s debt has further improved investor sentiment ahead of his bid for a second term in August.\n <\/p>\n