Africa Currency Weekly (with Aza)

God Dollar watches over Africa against the Yuan. The Naira is losing ground, the Cedi under wraps, the Rand under pressure, the Egyptian pound on green, the Kenyan shilling abused, the Ugandan strong in coffee, the Tanzanian is chained to bonds.
In this weekly column on African currencies, experts from AZA, the largest non-bank foreign currency broker in Africa, with a transaction volume of more than $ 1 billion per year, analyze the evolution of currency fluctuations on the continent.

The United States seeks to renew its economic influence in Africa
The United States is committed to rebuilding its relationship with Africa by countering China’s growing presence on the continent. Speaking late last week in Nigeria, US Secretary of State Antony Blinken said the United States wanted to build a stronger partnership with African countries, treating countries as equals rather than as partners. “Junior partners”. President Joe Biden is also planning to host a US-Africa summit to strengthen relations. While the details of this summit are unclear, we expect Africa’s ties to strengthen with the United States to expand access to capital to boost growth and improve bilateral trade prospects. Michael Nderitu Chief Risk Officer, AZA.

The Naira fell to 560 units against the dollar
The recent appreciation of the Naira in the unofficial market ended abruptly this week, as the currency fell back to 560 from 550 at the end of last week, amid renewed demand for the greenback. Market participants believe this was due to dollar buyers profiting from the previously stronger Naira. Nigeria’s central bank voted this week to keep its interest rate at 11.5% for the 14th consecutive month. Governor Godwin Emefielesaid said previous decisions to keep the rate stable had helped the economy recover and stressed the need to stay on course. Given the central bank’s sustained intervention in the official market, we expect the 560 naira level against the dollar to provide sufficient resistance until demand begins to decline again.

First rate hike in six years fails to stabilize Cedi
The Cedi weakened against the dollar this week, rising from 6.126 at the end of last week, as inflation jumped to 11% in October, a 15-month high. The Bank of Ghana succeeded in preventing a steeper drop in the Cedi by unexpectedly raising its benchmark interest rate for the first time in six years, from 100 bpm to 14.5%, with the aim to make investments more attractive and to absorb excess funds in circulation. We expect further pressure on the Cedi in the coming weeks before the central bank’s tighter monetary policy spills over to the economy.

Fed advice keeps Rand on its feet
The Rand weakened against the dollar this week, falling from 15.74 at the end of last week to 15.84, as sentiment for global risk weakened and investors flocked to assets. more secure after the US Federal Reserve said it might hike rates rather than expected to cool inflation. The South African Reserve Bank’s decision to raise its main interest rate from 25bpm to 3.75% last week has provided little respite, in line with market expectations. He also indicated that any further tightening would be gradual. “We expect sustained pressure on the Rand in the coming days as the Fed fears a persistent rise.”.

Green funds and SDGs hold the Egyptian pound
The Egyptian pound was unchanged against the dollar, trading at 15.68 / 15.76. Egypt expects to receive a $ 3 billion syndicated loan, which has been arranged by Emirates NBD and First Abu Dhabi Bank to help finance sustainable green projects in the country. This week, the Asian Infrastructure Investment Bank approved $ 360 million in funding to help Egypt meet its sustainable development goals and recover from the COVID-19 pandemic. We expect a stable pound over the coming week, supported by investor inflows.

No respite for the Kenyan Shilling
The Shilling fell to a new low against the dollar this week, trading at 112.50 / 113.20 from 111.90 / 112.10 at the close of last week due to increased activity imports from the manufacturing and general goods sectors, which exceeded foreign exchange inflows. The country’s foreign exchange reserves fell $ 221 million to $ 8.9 billion as the central bank tried to avoid a steeper decline. We expect the shilling to remain under pressure over the coming week.

Coffee exports boost Ugandan Shilling
The Shilling strengthened against the greenback this week, rising from 3570/3580 to 3565/3575 late last week as dollar supply outstripped business demand. Ugandan Trade Minister Francis Mwebesa this week met with EU Cooperation Chief Caroline Adriaensen to discuss building a sustainable and competitive industrial sector to boost economic growth in the country of East Africa. We expect the shilling to remain stable this week on support from agricultural exports, especially coffee, whose sales hit a record high in August.

Tanzania reopens 20-year bonds
The Shilling was unchanged against the dollar, trading at 2294/2310. This week, the Bank of Tanzania reopened its 20-year government bonds in an effort to increase market liquidity and reduce borrowing costs. A meeting between UK trade envoy to Tanzania John Woodcock and East African Business Council CEO John Bosco Kalisa highlighted Tanzania’s efforts to remove trade barriers, and Woodcock hinted that ‘a number of UK companies are interested in investing in the country. We expect the Shilling to be stable in the coming days as dollar demand from the manufacturing and energy sectors will be offset by investor inflows and agricultural exports. Terry Karanja, Treasury Associate, AZA


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