The African Currency Weekly (with Aza)

The Ghanaian Cedi devoured by 34% inflation. Malawi Kwacha devalued by 25%. The Rwandan Franc jostled by an inflation of 16%. The Naira is bottoming out and sinking. The Rand affected by load shedding. The Egyptian pound is near an all-time low. The Kenyan Shilling waiting for the William Ruto effect. Ephemeral Ugandan Shilling gains. The Tanzanian Shilling stuffs itself with maize. In this weekly column on African currencies, experts from Aza Finance, the largest non-bank foreign exchange broker in Africa, with a trading volume of more than 1 billion dollars per year, analyze the evolution of currency fluctuations on the continent.

Soaring inflation continues to dampen exchange rate outlook

Rising inflation continues to dampen the outlook for many currencies in Africa. The Bank of Ghana has been battling high inflation for 21 years at 33.9%, making the Cedi the second worst performing currency in the world this year (see Ghana report below). In Malawi, inflation has more than doubled since the start of the year to reach 24.6%. A shortage of foreign exchange led to a deepening fuel crisis in the country, with the central bank forced to devalue the Kwacha by 25% in May. Malawi is asking for IMF help to deal with the fuel crisis, but the Fund has reportedly postponed a visit scheduled for this week to discuss a new loan. With the postponement of IMF intervention, we believe that the exchange rate depreciation could continue, as imports are already continuing to reduce foreign exchange reserves. Meanwhile, in Rwanda, prices rose at the fastest rate this decade, reaching 15.9% in August. Rwandan central bank governor John Rwangombwa expects annual inflation to peak at 16% this year, given the combined measures of rate hikes and a continued government subsidy on fuels and inputs agricultural. The Rwandan franc could suffer further depreciation due to the country’s continued exposure to global commodity prices. Punishes Jani Head, Trading & Risk Innovation, AZA Finance.

Naira falls and nears all-time low of 710

The Naira approached a record low against the dollar in the unofficial market this week, trading at 706 from 701 at last week’s close. The Naira hit a record high of 710 in July. The Nigerian government hopes to raise around $4 billion a year from cashew nut exports as it seeks to increase its annual production to 500,000 tonnes from 300,000 tonnes previously. The state plans to invest in six new cashew processing facilities to increase production. Meanwhile, the Nigerian Senate has rejected the 12.43 trillion Naira deficit that would be created by tax exemptions and fuel subsidy payments that have been proposed in the 2023 government budget. next few days, but we don’t expect her to reach level 710. Ikenga Kalu, FX Trader, AZA Finance.

Ghana boosts dollar selling to stop currency’s worst slide

The Cedi rallied slightly against the dollar this week after the Bank of Ghana sold $60 million in the market on Tuesday through its currency futures auction. After revisiting its high of 10.08 on Monday, the currency is currently trading at 10.05, in line with last week’s close. The Bank of Ghana is battling a spike in inflation, which jumped in August to a 21-year high of 33.9% from 31.7% a month earlier, as import prices continue to climb. The Cedi is the world’s second worst performing currency this year, losing more than a third of its value against the dollar (only the crisis-hit Sri Lankan rupee had a more turbulent year). Given the inflationary backdrop, we expect further pressure, with the Cedi expected to weaken towards the 10.50 level in the near term. Murega Mungai, Trading Desk Manager, AZA Finance.

Rand leads for resistance at 17.60 after 100 days of power outages

The Rand has depreciated against the dollar this week, trading at 17.46 from around 17.30 at last week’s close, as Fed fears over the upside amid US inflation data was worse than expected, leading to a sell-off in emerging market currencies. At home, South Africa’s state-owned energy company, Eskom, has announced further rounds of load shedding due to continued maintenance issues at plants, after enduring more than 100 days power outages since the beginning of the year. We expect the Rand to continue trading above 17 but below the resistance level of 17.60 next week, with no surprises from the US Federal Reserve when it announces its decision on interest rates on Wednesday. Alex Barmuta, Forex Dealer, AZA Finance.

Egyptian pound nears all-time low on rising import costs

The Egyptian pound continued to fall against the dollar, trading at 19.36 from 19.32 at last week’s close, near an all-time low of 19.61 in December 2016. The continued weakness comes from the high import prices, rising cost of living and lack of positive economic data continue to weigh on the currency. The European Bank for Reconstruction and Development said it will fund the decommissioning of 5GW of inefficient gas-fired power plants starting next year, pledging up to $1bn for renewable energy generation in Egypt . In the long term, this could help divert local gas consumption towards increased exports, which will support the Egyptian pound. For the near term, we expect further weakness as the currency heads towards the 19.40 level. Mitch Diedrick, Forex Dealer, AZA Finance.

The Shilling may stabilize under Kenya’s new president

The Shilling weakened against the dollar, trading at 120.30/120.50 from 120.10/120.30 at the end of last week, near its all-time low of 120.67 on September 7, while importers’ demand for dollars remained high. William Ruto was sworn in this week as Kenya’s fifth president, pledging to improve the economy by tackling youth unemployment, supporting farmers struggling with severe drought conditions and bolstering the finances of the country. He also promised to release a $415 million fund to support small businesses and spur growth. With the end of the election period and the focus on reviving the economy, we expect to see the Shilling start to stabilize in the near term. Terry Karanja, Senior Treasury Associate, AZA Finance.

Ugandan Shilling gains may be short-lived due to cost pressures

The Shilling strengthened against the dollar from 3819 to 3809 last week as demand for currency from importers and commercial banks waned and inflows from commodity exporters increased. Uganda said this week it expects to finalize the selection of lenders for its $4 billion crude oil pipeline by November after the Islamic Development Bank committed $100 million for the project. , which is expected to start producing in 2025. We expect the Shilling to weaken in the short to medium term due to continued increases in transport, feed and input costs. Yadhav Panday, Forex Dealer, AZA Finance.

Tanzanian Shilling stable amid dispute over Tanzanian maize exports

The Shilling has appreciated slightly against the dollar this week, trading at 2330 from 2332 at last week’s close. Tanzanian Agriculture Minister Hussein Bashe has dismissed allegations that the country is freezing maize export permits, blaming foreign traders for not following export procedures properly. A group of 19 US companies are expected to explore business opportunities in Tanzania during a two-day fact-finding mission later this month as the country continues to court US investment. We expect the Shilling to remain stable over the coming week, supported by investor inflows. Kristine Van Helsdingen, Forex Dealer, AZA Finance.

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