Weekly Developments in Financial Markets November 29


FINANCIAL MARKETS DEPARTMENT

WEEKLY DEVELOPMENTS IN THE FINANCIAL MARKETS

(NOVEMBER 29 – DECEMBER 03, 2021)

Main highlights

Gross official foreign exchange reserves increased by US $ 7.4 million to close the review week at US $ 396.62 million (1.59 months of imports).

The Kwacha responded to improving market supply over the past two weeks by appreciating against the US dollar and South African rand. However, the local unit lost value against the pound sterling and the euro. The Kwacha closed at K822.9820 for the US dollar on 3e December 2021.

Liquidity conditions on the domestic money market remained very tight with the daily average excess reserves of commercial banks, before borrowing from the central bank, with a negative average of K 84.6 billion per day.

Primary auctions of Treasury securities continue to be heavily underwritten and sub-assigned. The cumulative ratio of allocations of Treasury securities to issues planned for the 2021/22 financial year fell from 41.97% to 41.61%.

Gross official foreign exchange reserves increased by approximately US $ 7.4 million to end the review period at US $ 396.62 million (1.59 months of imports). This compares to a decline of US $ 5.2 million recorded in the previous week.

During the review week, the retail foreign exchange market recorded weaker but notable entries given the levels generally seen during the current lean season. The ADB bought a total of US $ 30.23 million against US $ 32.50 million recorded in the previous week.

The Kwacha appreciated against the US dollar in response to two weeks of capital inflows exceeding US $ 30 million. In the process, the local unit gained 0.08% (67 tambala) to close the review period at K 822.9820 to the US dollar.

During the same period, the Kwacha also appreciated against the South African Rand but suffered losses against the British Pound and the Euro.. The Kwacha recorded an appreciation rate of 0.59% (34 tambala) against the South African rand and depreciation rates of 0.43% (K5.01) against the British pound and 8.09% ( K50,56) against the euro.

Liquidity conditions on the national money market remained very tight during the period under review as captured by the daily average of excess reserves of commercial banks, before borrowing from the central bank, which amounted to less than 84.6 billion K, similar to the 84.6 billion less seen the previous week. Trade in the interbank market decreased to K 6.32 billion per day from K 12.1 billion per day recorded in the previous week, while access on the Lombard facility increased slightly to K 109.2 billion K per day against 107.6 billion K per day.

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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 were expansionary during the review week, injecting a net K50 billion into the banking system. A total of around K44.8 billion was injected through net open market operations which included net access to the Lombard facility in the amount of K26.0 billion and reserve repo’s totaling K18.7 billion. The government injected an additional K 20.3 billion through the net repayment of domestic debt securities totaling K 10.8 billion and by spending an additional K 9.5 billion above the domestic revenue collected. In terms of bank system liquidity depletion, central bank commercial bank foreign exchange withdrawals to meet customer demands amounting to K 13.4 billion and central bank net foreign exchange operations of about 1.7 billion K.

Primary auctions of Treasury securities continue to be largely under-subscribed and under-allocated.Only Treasury bills were submitted to the primary auction in accordance with the issuance schedule and a total of K 4.6 billion has been subscribed and fully allocated against a planned issuance of K 17.0 billion. This represents a total of K 4.6 billion. allocation ratio to planned emissions of 27.31%. As in the last six consecutive weeks, the trend has reduced the cumulative ratio of Treasury securities allocation to the expected issuance ratio during fiscal year 2021/22, this time to 41.61% against 41.97%, and increased the grant over subscription ratio to 88.71% from 88.54. %.

Warning

Reserve Bank of Malawi published this content on December 10, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on December 10, 2021 02:21:04 PM UTC.

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