Weekly Developments in Financial Markets 15


FINANCIAL MARKETS DEPARTMENT

WEEKLY DEVELOPMENTS IN THE FINANCIAL MARKETS

(15 – 19 NOVEMBER 2021)

Main highlights

Gross official foreign exchange reserves increased by US $ 1.0 million to close the review week at US $ 395.46 million (1.58 months of imports).

The Kwacha maintained the gradual decline in value against the US dollar in November 2021, but has since recorded net gains against other currencies of major trading partners. The Kwacha closed at 823.2683 K to the US dollar on the 19e November 2021.

Liquidity conditions on the domestic money market remain very tight with the daily average excess reserves of commercial banks, before borrowing from the central bank, with a negative average of K 99.5 billion per day during the exam week.

Primary auctions of Treasury securities continue to be heavily underwritten and sub-assigned. The cumulative allocation ratio on issuance planned for the 2021/22 financial year has indeed fallen to 42.84% against 47.49% recorded in mid-October 2021.

Oil prices have fallen below US $ 80 a barrel due to European concerns over COVID. Brent oil prices fell 3.4% to US $ 78.40 per barrel, its

the lowest since early October, after peaking at US $ 82.24 per barrel.

Gross official foreign exchange reserves increased slightly by around US $ 1.0 million to end the review period at US $ 395.46 million (1.58 months of imports). This is in contrast to the $ 7.7 million decline recorded in the previous week.

Supply in the retail forex market continues to lag behind demand as expected on a seasonal basis. ADB purchased a total of US $ 22.37 million from the market during review week, compared to US $ 26.47 million recorded the previous week.

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The Kwacha maintains a gradual depreciation against the US dollar in November 2021, being losing 0.06% (46 tambala) during the review period and 0.23% (K1.93) during the first three weeks of the month.

However, the Kwacha made net gains against other currencies of major trading partners during the month.. The Kwacha lost 2.22% (K25.99) against the British pound during the review week to moderately counter the cumulative gain of 2.34% (K27.90) recorded in the first two weeks of November 2021. In the same review week, the Kwacha gained 1.73% (K18.12) and 0.63% (37 tambala) against the euro and the South African rand, respectively, to carry the cumulative gain against the euro in November 2021 at 1.06%

(11.05) and against the Rand at 0.48% (28 tambala).

Liquidity conditions on the domestic money market remained very tight as captured by the daily average of excess reserves of commercial banks, before borrowing from the central bank, which stands at minus 99.5 billion K against 94.5 billion less observed during the week ended 12e November 2021. The further tightening of liquidity conditions reduced loanable funds on the interbank market and increased commercial bank borrowing from the central bank. As a result, the volume of interbank transactions decreased to K14.8 billion per day from K22.7 billion per day recorded the previous week while access to the Lombard facility increased to K106.8 billion. per day against 105.9 billion K per day.

IBR remains firm and closely aligned with policy rate at 11.98 percent. Thus, the IBR continues to be located in the target corridor of + 0.2 / -4.0percentage points around the key rate.

The central bank’s total operations with commercial banks contracted during the review week, removing a net amount of about K 2.4 billion from the banking system. The net maturity of Treasury securities and customer deposits of commercial banks transferred to the central bank representing liquidity injections into the banking system at K 2.4 billion and K 4.9 billion, respectively, was fully offset by government net revenue withdrawals at K 7.2 billion, central bank net foreign exchange operations at K 49 million and central bank net open market operations at K 2.3 billion by K.

Primary auctions of Treasury securities continue to be largely under-subscribed and under-allocated.A total of KAR 3.7 billion has been subscribed and fully allocated in the primary treasury bill market against a planned issuance of KK 17.0 billion. This represents an allocation / expected issue ratio of 21.58%. The above reduced the cumulative allocation ratio of Treasury securities on the issue planned during the 2021/22 financial year to 42.84%, from 43.44%, while increasing the allocation ratio on 88.00% subscription against 87.86%.

Oil prices have fallen below US $ 80 a barrel amid European concerns over COVID. Brent oil prices fell 3.4% to US $ 78.40 per barrel, its lowest since early October, after peaking at US $ 82.24 per barrel.

Disclaimer

Reserve Bank of Malawi published this content on November 29, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on November 29, 2021 06:09:07 AM UTC.

Public now 2021


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