Kwacha Extends Rally, Leads Global Currency Gains

Zambia's kwacha has extended its year-end rally into 2026, gaining almost 10 percent against the US dollar since the start of December, the strongest performance of any currency tracked by Bloomberg.

The currency jumped nearly 4 percent on Monday, its biggest one-day advance since October 2023, and reached a fresh two-year high on Tuesday.

Chipo Shimoomba, a treasury dealer at First Alliance Bank of Zambia, attributed the gains to the central bank's December 26 directive curbing dollar usage, which triggered sellers to offload dollars. Corporates also aggressively converted foreign exchange into kwacha to settle tax obligations and fund new-year operations.

Other factors supporting the kwacha include surging copper prices and the introduction of yuan-denominated mining tax payments that began in October.

Three-month copper futures surged to a record $13,090 per ton on the London Metal Exchange on Tuesday. Zambia is Africa's second-largest copper producer after the Democratic Republic of Congo.

Finance Minister Situmbeko Musokotwane expects the Chinese yuan to be used in 15 percent of mining tax settlements this year.

The kwacha's strength has also benefited Zambia's credit markets, with dollar bonds due 2053 gaining 0.74 cents to trade at 71.51 cents on the dollar.

For Zambian consumers, the stronger kwacha means lower prices for imported goods including fuel, cooking oil, and other commodities, potentially easing the cost of living pressures that have affected households.