UPDATE 1-Zambia to hike commercial bank reserve ratios - banks

Wed Feb 26, 2014 5:35am EST

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LUSAKA Feb 26 (Reuters) - Zambia's central bank will hike statutory reserves for commercial banks to 14 percent from 8 percent from March 10 in a bid to reduce liquidity, Cavmont Bank said in a bulletin on Wednesday.

A spokesman for the central bank declined to comment but sources at two other commercial banks also said their institutions had received instruction regarding the new requirements.

Traders said the move would help prop up the ailing kwacha , which fell to an all-time low of 5.80 against dollar last week.

"There is potential that there will be reduced demand for the dollar because of reduced supply of the kwacha," said one local trader from a commercial bank.

Zambia's trade minister last week said the kwacha slide was a big cause for concern because it could fuel inflation in Africa's top copper producer.

Traders attributed the kwacha's slide to foreign buyers staying away from a recent bond auction, part of this year's wider investor retreat from emerging and frontier markets. (Reporting by Chris Mfula; Editing by Ed Stoddard)

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