LUSAKA/LONDON, Sept 28 (Reuters) – Zambia’s currency went into freefall on Monday as prices for its copper exports hit a one-month low, feeding fears that mining giant Glencore might further rein in its extensive operations there.
The kwacha was down more than 17 percent against the dollar at one point, its biggest one-day fall on record, further hampered by a rating downgrade from credit agency Moody’s that the government criticised as unsolicited.
“We have a double-whammy, meaning copper prices continue to soften, and production targets are really at risk because of the Glencore news,” said Kevin Daly, portfolio manager at Aberdeen Asset Management in London.
Glencore’s Mopani Copper Mines is the second largest employer in Zambia after the government, but fears over the mining and trading company’s ability to withstand a prolonged fall in metals prices sent its shares tumbling 25 percent on Monday.
Moody’s, which cut its sovereign rating to B2 from B1 on Friday, said it expected Zambia’s fiscal and debt positions to worsen, and Daly said on Monday it might now have “little choice but to turn to the IMF”.
Moody’s only assigned unsolicited sovereign ratings “when confident that we have sufficient information and after careful consideration of the usefulness of the rating to the capital markets,” spokesman Peter Griffiths told Reuters.
“Importantly, a sovereign rating provides an analytical benchmark for ratings of other issuers in the country, such as banks or corporates.”
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