{"id":3550,"date":"2021-02-05T00:00:00","date_gmt":"2021-02-05T00:00:00","guid":{"rendered":"https:\/\/staging.azafinance.com\/2021\/02\/05\/egypts-stable-pound-offers-lesson-in-loosening-fx-restrictions\/"},"modified":"2024-09-26T07:43:20","modified_gmt":"2024-09-26T07:43:20","slug":"egypts-stable-pound-offers-lesson-in-loosening-fx-restrictions","status":"publish","type":"post","link":"https:\/\/azafinance.com\/egypts-stable-pound-offers-lesson-in-loosening-fx-restrictions\/","title":{"rendered":"Egypt\u2019s stable pound offers lesson in loosening FX restrictions","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

Egypt\u2019s stable pound offers lesson in loosening FX restrictions<\/strong><\/h2>\n\n\n\n

The Egyptian\u00a0Pound has been one of the strongest-performing African, and\u00a0indeed\u00a0emerging market, currencies since the start of 2019, on the back of improving investor confidence and the government\u2019s economic stimulus package. The currency appreciated by more than 2% from a low of 16.22\u00a0against the US dollar since June\u00a0last year\u00a0to 15.72, while major peers in the FX markets depreciated\u00a0between 2%\u00a0and\u00a030% during the same period. The Central Bank of Egypt\u2019s decision to freely float the pound in November 2016 has gradually led to an improvement in investor confidence, notably among foreign investors. The move ended a regime of multiple or parallel exchange rates, which had dented investor confidence over time. Egypt\u2019s pound appreciated by 10.8% between June 2017 and June 2020. The government\u2019s economic stimulus to counter the negative impact of COVID-19 has also helped shore up investor confidence. By November 2020, it had disbursed EGP 65 bn (USD 4.1 bn) of a planned EGP 100 bn (USD 6.3 bn) package on healthcare, staple goods and employment grants for day labourers. The government has also spent an additional EGP 70 bn (USD 4.4 bn) to improve pensioners\u2019 allowances and boost public sector salaries and pensions. The country\u2019s foreign exchange reserves reached USD 39.22 bn at the end of October 2020, up from USD 38.4 bn at the end of the previous month. The rate of inflation stood at 5.4% in December, compared to 5.7%\u00a0the\u00a0month\u00a0before.\u00a0We project a steady outlook for the Egyptian pound. Other African nations with multiple exchange rate regimes might look at Egypt\u2019s example.\u00a0<\/p>\n\n\n\n

NDFs signal 4% Naira devaluation<\/strong><\/h2>\n\n\n\n

After a relatively stable week\u00a0in which the Naira traded on the parallel market in the\u00a0range of 467\u00a0to\u00a0480\u00a0against the\u00a0dollar, we are now expecting depreciation towards 490.\u00a0The Central Bank of Nigeria plans to settle Feb. 24 Non-Deliverable Forwards (NDFs) at\u00a0412.14 on the official market. This represents a 4% devaluation compared with 395\u00a0per dollar\u00a0at the Investors and Exporters (I&E) window.\u00a0Our outlook keeps in mind moves by the CBN aimed at stabilising the currency, including\u00a0barring\u00a0anyone with unrepatriated export proceeds pre-dating Jan. 31 from accessing banking services. Markets\u00a0have experienced a\u00a0decline\u00a0in speculative\u00a0purchases of\u00a0the\u00a0greenback. On a macro level,\u00a0gross external\u00a0reserves\u00a0inched up to\u00a0USD 36.19 bn\u00a0on Feb. 1,\u00a0providing some\u00a0reassurance\u00a0for\u00a0longer term stability. The\u00a0central bank has set a target of achieving USD 40 bn in external reserves, which should underpin the currency\u2019s \u2018key resistance level\u2019 and boost foreign portfolio investment inflows.<\/p>\n\n\n\n

Stimulus measures boost Rand<\/strong><\/h2>\n\n\n\n

The\u00a0Rand\u00a0gained 1% to 14.94\u00a0Rand\u00a0to the dollar from 15.08 in this week’s trading session,\u00a0supported by\u00a0the prospect of economic measures to counter the negative impact of the pandemic. Governor Lesetja Kganyago indicated that the\u00a0South\u00a0African\u00a0Reserve Bank has\u00a0leeway\u00a0to offer\u00a0further\u00a0stimulus\u00a0if necessary,\u00a0after keeping its benchmark repo rate\u00a0on hold\u00a0at 3.5% last week. There is scope to reduce the base rate as it is not as near to zero as in the developed world, while inflation is not in negative territory, allowing room to respond to negative events, according to Kganyago’s comments in a televised interview with Bloomberg.\u00a0Optimism that the country\u2019s COVID-19\u00a0vaccination program\u00a0will\u00a0begin rollout\u00a0to tackle one of Africa\u2019s highest infection rates helped the Rand\u2019s recovery, along with\u00a0the\u00a0US\u00a0dollar\u2019s slight retreat\u00a0in what has been a volatile week for global financial markets. We project a steady outlook in the coming days\u00a0based on the domestic\u00a0measures\u00a0put in place.<\/p>\n\n\n\n

Steady Cedi on 4.8% Ghana GDP outlook<\/strong><\/h2>\n\n\n\n

The Cedi gained climbed to\u00a05.81\u00a0to the dollar\u00a0from 5.85.\u00a0While inflation crept up\u00a0to 10.4% in December\u00a0from 9.8%\u00a0the previous month\u00a0on the back of the pandemic\u2019s\u00a0disruption\u00a0to\u00a0the agricultural sector, more positive indicators came from Fitch\u00a0Ratings forecasting a\u00a04.8% GDP growth rate year-on-year\u00a0during 2021 (against 1.2% growth in 2020). Resumption of\u00a0economic activity\u00a0among the country\u2019s\u00a0key trading partners,\u00a0most notably\u00a0China\u00a0and\u00a0Europe, bodes well for a positive economic outlook. In light of all this, we foresee a steady\u00a0Cedi in the medium term.<\/p>\n\n\n\n

Google pledge supports stable Shilling<\/strong><\/h2>\n\n\n\n

The Kenyan\u00a0Shilling\u00a0remained stable\u00a0in the range of\u00a0110.05\u00a0to 110.25\u00a0per dollar as improved\u00a0inflows\u00a0from agricultural exports\u00a0met\u00a0demand for dollars from importers.\u00a0At the end of\u00a0January, usable foreign exchange reserves remained adequate at USD 7.663 bn\u00a0(4.71 months of import cover),\u00a0helping to\u00a0support\u00a0the\u00a0Shilling. Google, the search engine,\u00a0pledged USD10m\u00a0(KES 1.1 bn)\u00a0last week\u00a0towards the country\u2019s\u00a0economic recovery, including\u00a0USD 3 m\u00a0for\u00a0small businesses,\u00a0USD 5 m for startups, and\u00a0USD 2 m\u00a0for\u00a0local non-profit organisations. We expect the currency to remain stable in the coming week.<\/p>\n\n\n\n

Ugandan Shilling steady on exports outlook\u00a0<\/strong><\/h2>\n\n\n\n

The Ugandan\u00a0Shilling traded in a stable range\u00a0between\u00a03,680\u00a0and\u00a03,690\u00a0Shillings to the dollar.\u00a0Favourable weather conditions are a positive indicator for dollar inflows\u00a0from agricultural exports, including\u00a0coffee, the country\u2019s\u00a0main cash crop. This should\u00a0support stability for the\u00a0Shilling against dollar demand from importers and negative fallout from disruption created by disputed\u00a0presidential\u00a0elections held\u00a0in early January.\u00a0Opposition leader Bobi Wine filed a legal challenge in the country\u2019s\u00a0Supreme\u00a0Court on Monday, seeking to annul\u00a0the\u00a0election results, which\u00a0handed victory to President Yoweri Museveni.\u00a0US and international pressure will weigh on Uganda given its indebtedness. The Ministry of Finance\u00a0projected\u00a0that public debt\u00a0would\u00a0jump\u00a0to 49.9% of GDP by June 2021, and peak\u00a0at\u00a054.1%\u00a0at\u00a0the end of the 2022-2023 financial year, in order\u00a0to finance infrastructure projects and\u00a0the\u00a0post COVID-19\u00a0recovery.<\/p>\n\n\n\n

BOT confidence for Tanzanian Shilling against oil inflation<\/strong><\/h2>\n\n\n\n

The Tanzanian Shilling held steady this week at 2,314\/2,324.\u00a0The\u00a0monthly economic review for January\u00a0from the Bank of Tanzania, the country\u2019s central bank,\u00a0indicates continued\u00a0stability\u00a0amid a\u00a0gradual increase in supply of foreign exchange,\u00a0mostly\u00a0from\u00a0improved\u00a0exports\u00a0of\u00a0minerals, cash crops and manufactured goods.\u00a0The petrol price in the country rose\u00a0to TZS 1,887 per litre\u00a0after the Energy and Water Utilities Regulatory Authority announced a new cap on prices of petroleum products this week,\u00a0driven by\u00a0higher\u00a0global oil prices. There is a concern that this might\u00a0lead to higher inflation\u00a0in the future. We foresee a stable\u00a0Shilling in the coming week, as Tanzania continues attracting investors into the country.<\/p>\n\n\n\n

Receive weekly FX updates from AZA. Sign up here<\/a>.<\/h2>\n\n\n\n
Issued by AZA. This Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and is based on their understanding and interpretation of market events. AZA cannot be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"

Egypt\u2019s stable pound offers lesson in loosening FX restrictions The Egyptian\u00a0Pound has been one of the strongest-performing African, and\u00a0indeed\u00a0emerging market, currencies since the start of 2019, on the back of improving investor confidence and the government\u2019s economic stimulus package. The currency appreciated by more than 2% from a low of 16.22\u00a0against the US dollar since […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3551,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[278,249,22,296,204,205,206,207,316,209,308,32,363,364,354,298,299,34,217,300,218,357,301,192,231,33,302,257,303,304,182,358,359,305,306],"class_list":["post-3550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fx-insights","tag-africa-covid19","tag-africa-debt","tag-africa-foreign-exchange","tag-africa-forex","tag-african-currencies","tag-african-currencies-forex","tag-african-currencies-naira","tag-african-currencies-vs-dollar","tag-cedi-vs-dollar","tag-covid-19-africa","tag-covid-19-kenya","tag-ghana-cedi","tag-ghana-cedi-in-dollar","tag-ghana-cedi-rate","tag-kenya-2021","tag-kenyan-shilling-rate","tag-kenyan-shilling-vs-dollar","tag-naira","tag-naira-after-lockdown","tag-naira-rate","tag-naira-rate-covid-19","tag-naira-usd-liquidity","tag-naira-vs-dollar","tag-rand","tag-rand-range","tag-rand-rate","tag-rand-vs-dollar","tag-tanzania","tag-tanzanian-shilling-rate","tag-tanzanian-shilling-vs-dollar","tag-uganda","tag-ugandan-election","tag-ugandan-shilling-election-rate","tag-ugandan-shilling-rate","tag-ugandan-shilling-vs-dollar"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/comments?post=3550"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3550\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media\/3551"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}