{"id":3556,"date":"2021-02-19T00:00:00","date_gmt":"2021-02-19T00:00:00","guid":{"rendered":"https:\/\/staging.azafinance.com\/2021\/02\/19\/rand-on-a-high-it-hits-its-60th-anniversary\/"},"modified":"2021-02-19T00:00:00","modified_gmt":"2021-02-19T00:00:00","slug":"rand-on-a-high-it-hits-its-60th-anniversary","status":"publish","type":"post","link":"https:\/\/azafinance.com\/rand-on-a-high-it-hits-its-60th-anniversary\/","title":{"rendered":"Rand on a high it hits its 60th anniversary","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

Rand on a high as it celebrates 60 years<\/strong><\/h2>\n\n\n\n

In an appropriate run-up to the currency\u2019s 60th anniversary this Sunday, the Rand resumed its rally this week and continues to point in a positive direction amid a sharp decline in the nation’s COVID infection data and a\u00a0spike\u00a0in the price of its precious metal\u00a0exports. On Wednesday,\u00a02,320 new positive cases were recorded among 35,413 tests\u00a0in the country, giving a positivity rate of 6.55% \u2014 well below the 10% to 12% range that the government\u00a0indicated\u00a0would be of concern. The VanEck Vectors Rare Earth and Strategic Metals Exchange Traded Fund\u00a0(NYSE:REMX)\u00a0reached $84.87 on Feb.\u00a012, more than doubling from below $40 in November.\u00a0<\/p>\n\n\n\n

These developments\u00a0are encouraging news for\u00a0investors\u00a0seeking\u00a0signs of a meaningful bounce in economic activity in South Africa later this year.\u00a0The currency has strengthened\u00a0from a weak point of 15.30 to the dollar\u00a0in mid-January to 14.58 this week.\u00a0A rally of\u00a03.6% makes it\u00a0one of the strongest-performing emerging market currencies this month. Year-to-date it is up 1.7%, trailing other EM currencies like the Turkish Lira, up 6.7%.<\/p>\n\n\n\n

There is reason for cautious optimism. In\u00a0his\u00a0State of the Nation Address last Thursday, President Cyril Ramaphosa outlined government plans to import 500,000 doses of the Johnson & Johnson vaccine, which\u00a0should\u00a0arrive in South Africa\u00a0within the next month.\u00a0Another 20m Pfizer doses have also been secured, with deliveries expected to begin at the end of March.\u00a0Ramaphosa\u00a0also announced the extension of some COVID-19 grant relief measures,\u00a0including\u00a0the Temporary Employer\/ Employee Relief Scheme and the unemployment social grant for a further three months\u00a0(R350\u00a0per month).\u00a0<\/p>\n\n\n\n

We expect the currency to appreciate towards the 14.45 critical level in the short term and remain stable at that rate during the medium term amid the recent rally in metal prices and positive sentiment around the budget presentation on Feb. 24. The South African Treasury is expected to place further emphasis on tax collection and administration in a bid to support the economy.<\/p>\n\n\n\n

Closing Naira gap signals crawling-peg devaluation<\/strong><\/h2>\n\n\n\n

The Naira depreciated at the official I&E window to a 10-month low of 410 to the dollar\u00a0on Wednesday, as high FX demand piled more pressure on the market. The currency continues to lose ground as resumed business activity adds to demand for the greenback while the low supply of foreign exchange\u00a0remains critical. On the parallel market, the Naira held to a stable range of 465 to 473 against the dollar. Despite\u00a0the\u00a0consumer price index showing 16.47% inflation for the year to January, the currency maintained its stability.\u00a0Headline inflation is the highest in three years, according to the country’s\u00a0National Bureau of Statistics. In the medium term, we expect further depreciation. The Central Bank of Nigeria could\u00a0deploy an\u00a0unscheduled crawling-peg devaluation,\u00a0with the aim of closing the gap between the spot market and parallel rates, which remain almost 20% apart.<\/p>\n\n\n\n

Eurobond and FX forward auction to spur Cedi<\/strong>\u00a0<\/h2>\n\n\n\n

The\u00a0Cedi gained against the\u00a0dollar to an interbank rate of 5.7597,\u00a0as\u00a0the Bank of Ghana\u00a0outlined\u00a0plans to sell\u00a0$775mn dollars this year\u00a0in order\u00a0to support the local currency. The\u00a0central bank\u00a0is\u00a0injecting\u00a0$50m\u00a0through a\u00a0fortnightly Foreign Exchange Forward Auction, which started in\u00a0January\u00a0and will continue until\u00a0June,\u00a0after which it\u00a0will reduce to $25m\u00a0for the rest of the year.\u00a0We\u00a0expect this\u00a0sustained support\u00a0will\u00a0keep the\u00a0Cedi\u00a0reasonably\u00a0steady in 2021\u00a0and appreciate to the key resistance level\u00a0of 5.50. Up to now, these\u00a0new foreign exchange\u00a0auctions have\u00a0halted the slide of the Cedi against the dollar, which depreciated\u00a03.9%\u00a0last year.\u00a0We expect the currency to gain\u00a0further in the coming weeks\u00a0on the back of a $3bn Eurobond that was issued at the start of February. The government is indicating that it will use\u00a0up to $1bn of the\u00a0Eurobond\u00a0to\u00a0renegotiate its\u00a0supply deals with\u00a0independent power producers and a further\u00a0$1bn\u00a0will\u00a0be put towards retiring expensive legacy debt.<\/p>\n\n\n\n

Egyptian pound\u00a0well-positioned as Japan backs electricity<\/strong>\u00a0<\/h2>\n\n\n\n

The\u00a0Egyptian pound remained stable at 15.61 to the dollar this week, fetching 15.57 and 15.67 for purchase and sale, respectively. The\u00a0government announced\u00a0that the country had received\u00a0shipments of coronavirus vaccines from Sinopharm and AstraZeneca. Doctors and nurses are expected to be the first people vaccinated,\u00a0followed by\u00a0elderly and\u00a0those\u00a0with chronic diseases in isolation. During the week, the\u00a0government signed an agreement with the Japanese government for\u00a0a 25bn Yen ($240m)\u00a0loan\u00a0to\u00a0help\u00a0develop Egypt\u2019s electricity sector and reduce the\u00a0country’s financing gap.\u00a0The\u00a0Egyptian\u00a0government\u00a0is also\u00a0supporting\u00a0the export sector through the\u00a0‘immediate cash payment’\u00a0initiative\u00a0\u2013\u00a0which helps companies to pay their export dues \u2013 to the tune of\u00a021.5bn\u00a0Egyptian pounds ($1.37bn). The Institute of International Finance\u00a0has given a\u00a0positive projection for Egypt\u2019s economic performance,\u00a0expecting growth\u00a0of\u00a04.7% in 2022\u00a0and\u00a05.1% in 2024.\u00a0We foresee\u00a0a\u00a0gain\u00a0in\u00a0the pound in the coming week, on the back of renewed\u00a0optimism\u00a0for\u00a0fighting coronavirus\u00a0through\u00a0the vaccine\u00a0rollout, government support\u00a0for exporters\u00a0and investor inflows.<\/p>\n\n\n\n

IMF and OPEC Fund flows help steady Kenyan Shilling outlook<\/strong><\/h2>\n\n\n\n

The Shilling remained\u00a0in a\u00a0stable range with\u00a0a\u00a0mild depreciation\u00a0to\u00a0109.55\u00a0Shillings\u00a0per dollar during the week, while the\u00a0country’s\u00a0foreign exchange reserves held at an adequate\u00a0$7.63bn\u00a0on Feb. 11\u00a0(4.69 months of import cover). Inflows from international lenders and investors are likely to support the\u00a0currency\u00a0in the coming weeks.\u00a0The\u00a0OPEC Fund\u00a0for International Development (OFID)\u00a0signed a $20m public sector loan agreement with Kenya to\u00a0upgrade the 90km Samatar to Wajir Road as part of the north and northeast Kenyan development initiative programme.\u00a0The country also agreed to a $2.4bn loan\u00a0with the International Monetary Fund,\u00a0aimed at responding to the next phase of the COVID-19\u00a0emergency\u00a0and reducing\u00a0the country’s\u00a0debt levels.\u00a0The Fund’s help should\u00a0strengthen the\u00a0country’s\u00a0monetary policy framework and support financial stability.\u00a0The\u00a0IMF projected an economic\u00a0growth rebound\u00a0of\u00a07.6%\u00a0in 2021,\u00a0as the external sector proves\u00a0resilient against the backdrop of the\u00a0COVID-19\u00a0shock, with horticultural exports and remittances performing well. We foresee a stable\u00a0Shilling in the coming week.<\/p>\n\n\n\n

Ugandan Shilling holds steady amid Magnitsky threat\u00a0<\/strong><\/h2>\n\n\n\n

The Ugandan\u00a0Shilling\u00a0strengthened\u00a0against the dollar\u00a0during the week, ranging from\u00a03655\u00a0to\u00a03665, amid\u00a0reduced trading activities as mid-month tax payments\u00a0limited\u00a0demand for hard currency.\u00a0At its\u00a0monetary policy\u00a0meeting held on Monday, the\u00a0Bank of Uganda\u00a0maintained\u00a0the\u00a0key Central Bank Rate\u00a0at 7% in a bid to encourage further reductions in commercial interest rates and\u00a0to\u00a0boost credit demand. The\u00a0Bank\u00a0said it\u00a0would\u00a0extend for\u00a0a further\u00a0six months\u00a0its\u00a0credit\u00a0relief\u00a0measures effective from\u00a0April 1,\u00a0and also maintain\u00a0its\u00a0COVID-19\u00a0liquidity\u00a0assistance\u00a0programme\u00a0to supervised financial institutions.\u00a0The Bank\u00a0projects economic growth between 3% and\u00a03.5% in\u00a0the\u00a0financial year 2020\u00a0to 2021, on the back of the vaccination rollout in Uganda and its trading\u00a0partners.\u00a0<\/p>\n\n\n\n

Amidst continued international political pressure, the\u00a0European Union\u00a0parliament last week\u00a0threatened a new\u00a0human rights sanction mechanism,\u00a0known as the\u00a0EU Magnitsky Act, for\u00a0Uganda. It includes sanctions against\u00a0individuals and organisations deemed responsible for human rights\u00a0violations,\u00a0following the EU’s objection to Uganda’s\u00a0general election process\u00a0last month.\u00a0The act states\u00a0that\u00a0the country\u00a0will be under\u00a0greater\u00a0scrutiny of its fiscal management and transparency,\u00a0while\u00a0the\u00a0European\u00a0Commission will conduct\u00a0systematic reviews of EU budget support programmes\u00a0in the country. It will investigate any\u00a0risk of funds being diverted for use by the Ugandan authorities\u00a0to\u00a0activities\u00a0that could amount to an\u00a0abuse\u00a0of\u00a0human rights.\u00a0The EU\u00a0provided Uganda with 578m Euros in the five years to 2020\u00a0to support good governance, improve infrastructure, ensure food security and\u00a0help agriculture, and\u00a0a further\u00a0112.2m Euros\u00a0came\u00a0from the EU Emergency Trust Fund for Africa.\u00a0The government has\u00a0described the EU accusations as\u00a0‘unbalanced and biased’.\u00a0For now, we do not expect the international pressure to weigh on\u00a0the\u00a0Shilling, maintaining a stable\u00a0outlook for\u00a0the\u00a0week ahead.

\u00a0
Tanzanian Shilling\u00a0stable while US COVID alert weighs on tourism
<\/strong>
The Tanzanian\u00a0Shilling\u00a0dipped\u00a0slightly\u00a0from\u00a0last week’s range of\u00a02,314\u00a0to\u00a02,324\u00a0against the dollar\u00a0to 2,311\/2,329.\u00a0The\u00a0currency continues to be supported by inflows from foreign investors and from the export of agricultural produce and minerals. The government and\u00a0the\u00a0European\u00a0Union signed agreements\u00a0for\u00a0grants\u00a0for six projects in the electricity sector and to support private sector development, valued at 111.5m Euros.\u00a0Last week,\u00a0the US Embassy issued a health alert on Tanzania, saying that\u00a0it\u00a0was\u00a0aware of a significant increase in the number of COVID-19 cases in the country since January and\u00a0advising\u00a0people\u00a0to\u00a0reconsider travel.\u00a0With the\u00a0Tanzanian\u00a0government announcing\u00a0that\u00a0the country is COVID-free and\u00a0saying that it\u00a0has\u00a0no plans\u00a0to import\u00a0coronavirus vaccinations,\u00a0a severe hit on the\u00a0tourism\u00a0sector is likely. The sector\u00a0is an important\u00a0source of\u00a0dollar\u00a0inflows\u00a0into the country. For the coming week,\u00a0we foresee a stable\u00a0Shilling\u00a0on the back of inflows from the EU agreement and\u00a0investors.\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0 <\/p>\n\n\n\n

Follow us on LinkedIn<\/a> for more insights about the performance of African currencies and economies!<\/em><\/strong><\/h2>\n\n\n\n


Issued\u00a0by\u00a0AZA. This Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and\u00a0is based on their understanding and interpretation of market events. AZA cannot\u00a0be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.<\/em><\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"

Rand on a high as it celebrates 60 years In an appropriate run-up to the currency\u2019s 60th anniversary this Sunday, the Rand resumed its rally this week and continues to point in a positive direction amid a sharp decline in the nation’s COVID infection data and a\u00a0spike\u00a0in the price of its precious metal\u00a0exports. On Wednesday,\u00a02,320 […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3557,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[278,249,22,296,204,205,206,207,316,209,308,26,27,365,32,363,364,354,298,299,34,217,300,218,357,301,192,231,33,302,366,257,303,304,182,358,359,305,253],"class_list":["post-3556","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-egypt","tag-egyptian-pound","tag-egyptian-pound-vs-dollar","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-senegal-economy","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-xof"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3556","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=3556"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3556\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media\/3557"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}