Naira wipes out recent gains amid BDC shortages

The Naira continued on a declining trend, wiping out gains from last month, due to scarcity of dollars amid rising demand. Players in the market continue to increase their dollar positions, putting pressure on the local currency, especially in the unofficial market where rates have weakened from 455 earlier in the week to 465. Limited inflows from foreign direct investment and lower oil earnings have been among the chief causes of the dollar shortages, with Bureau de Change FX sales only able to meet a portion of the market demand. Foreign exchange reserves at $35.7 billion remain sufficient to cover at least eight months’ import cover. We foresee sustained pressure on the currency.

Rand rally hangs in balance on SARB decision

The Rand rallied from 16.90 to 16.31 to the dollar this week as hopes for coronavirus vaccines improved risk appetite, boosting the emerging market FX benchmark. With the South African Reserve Bank monetary policy committee meeting yesterday, volatility was predicted to increase, with markets split on the prospect of further stimulus measures. However, rates were held steady. We foresee sustained levels on the Rand in the coming days.

Shilling weakens as Kenyan GDP growth rate halves

Increased dollar demand from importers and companies drove Kenya’s Shilling to as low of 108.70 per dollar against 108.30 levels last week. The economy will grow by less than 2.5% this year, Treasury Cabinet Secretary Ukur Yatani said, compared with 5.4% last year. The COVID-19 pandemic has hit the tourism sector especially hard, reducing government revenue from taxes. We foresee further pressure on the Shilling from continued dollar demand by importers.

Ugandan Shilling calm as Treasuries get a revamp

The Ugandan Shilling held steady at 3695/3705 levels as importer activity waned and mid-month tax payments by big firms limited appetite for hard currency. The Bank of Uganda reorganized the way in which government securities are traded, appointing seven primary dealer banks for competitive bidding and subsequent resale in the secondary market. This is likely to improve the attractiveness of Uganda’s treasuries to investors in the country and outside by improving price transparency and liquidity. The World Bank also approved a $130.8m (Sh484bn) grant to the Uganda National Roads Authority (UNRA) from the International Development Association (IDA) for refugee roads. We expect stability to continue in the coming week.

Kenya flights and Pakistan talks steady Tanzanian Shilling

The Tanzanian Shilling stuck at levels of 2315/2325 (2320), from 2315/2324.95 (2319.98) a week ago. Pakistan, which imports an annual $85m of goods and services from Tanzania, led by cotton and tea, held talks to boost trade between the two nations and address imbalances. Further trade potential emerged as Kenya, one of Tanzania’s top trading partners, and Tanzania reopened their skies after mutual bans because of COVID. We foresee the Shilling holding steady in the coming week as dollar demand from manufacturing companies is balanced by inflows from agricultural products.