A majority of African central banks have kept their interest rates unchanged since the start of this year as the economic growth outlook is countered by inflation fears. Only a few countries, including Mozambique, Zambia and Zimbabwe, have tightened rates this year as they attempt to curb rising inflation. Even fewer have cut rates, with Ghana the latest, and the Democratic Republic of Congo among those loosening monetary policy to stimulate their COVID-stricken economies. We don\u2019t expect Ghana\u2019s surprise reduction to be followed by others. While the Bank of Ghana \u0301s Monetary Policy Committee decided to lower its main rate from 14.5% to 13.5% this week, this is still double Kenya\u2019s 7% and quadruple South Africa’s 3.5%. We continue to expect little change overall in the continent\u2019s central bank rates for the coming 12 months.<\/p>\n\n\n\n
The Naira held firm against the dollar at 412 on the NAFEX window as the market continued to digest the impact of the Central Bank of Nigeria adopting the NAFEX as its official exchange rate. Meantime, the Naira continued to lose ground against the greenback on the parallel market, dropping to 498 from 495 at last Friday\u2019s close. Nigeria\u2019s currency reserves also declined slightly to $34.24 billion\u2014a 0.04% decrease compared to the previous week\u2014suggesting the recent rise in global crude oil prices hasn\u2019t fed through into increased revenue from oil exports. We project sustained pressure on the Naira in the coming days.<\/p>\n\n\n\n
The Cedi fell again this week to 5.766 to the dollar from 5.754 at last Friday\u2019s close after the Bank of Ghana on Monday cut its benchmark interest rate by 100 basis points to 13.5% in a bid to support the country\u2019s recovery from COVID-19. That is Ghana\u2019s lowest policy rate in more than nine years and its first-rate move since March last year. The central bank\u2019s surprise rate cut came as inflation fell in April to 8.5% from 10.3% a month earlier. We expect that policy easing to keep the pressure on the Cedi over the coming week.<\/p>\n\n\n\n
The Rand moved higher against the dollar, trading at 13.51 compared to 13.77 at last week\u2019s close, supported by strong commodity prices. Rising COVID cases have prompted the South African government to tighten lockdown measures following the reemergence of the new variant and the sluggish pace of vaccination. For now, expectations that US interest rates are set to stay lower for longer continues to support the Rand. Against that backdrop, we believe the currency will maintain its gains against the dollar in the coming week.<\/p>\n\n\n\n
The pound weakened slightly against the dollar, trading at 15.67 compared to 15.63 at last week\u2019s close. Economic data released Wednesday showed Egypt\u2019s economy expanded 2.9% in the third quarter of the 2020\/21 financial year, up from 2% in the second. Egypt\u2019s Minister of Planning and Economic Development Hala El Said forecast further growth in the fourth quarter, ranging from 5.2% to 5.5%. Growth averaged 1.9% during the first nine months of the financial year compared to 5.4% over the same period in 2019\/20. The government this week lifted restrictions on the hospitality industry; with business activity resuming we expect to see the continued economic recovery leading to gains in the Pound over the coming days.<\/p>\n\n\n\n
The Shilling slipped against the dollar, trading at 107.65\/107.85 compared to 107.55\/107.75 at last Friday\u2019s close due to end of month dollar demand from the energy and manufacturing sectors. Kenya is expecting to receive a $750 million loan from the World Bank and an additional $410 million from the International Monetary Fund (IMF) by the end of the month, with the Central Bank of Kenya saying it is seeking potential debt repayment extensions from its external lenders to help its economy recover from the effects of the COVID-19 pandemic. We expect the Shilling to be supported this week with reserves remaining adequate at $7.48 billion, sufficient for 4.57 months of import cover.\u00a0<\/p>\n\n\n\n
The Shilling was steady against the dollar this week trading at 3540\/3550, supported by end of month inflows from investors and lighter appetite for the greenback from importers. The IMF this week reached a staff-level agreement with Uganda over a three-year $ 1billion financing package to help the country tackle the near-term impacts of the coronavirus pandemic. The deal is subject to approval from IMF management, with a decision expected in the coming weeks. We anticipate continued support for the Shilling over the next seven days from investor inflows and agriculture commodity exports.<\/p>\n\n\n\n
The Shilling was unchanged against the dollar, trading at 2314\/2324 in line with last Friday\u2019s close. At the end of last week, the Bank of Tanzania released a statement estimating the country will achieve growth of 5.6% this year, boosted by activity in the construction, agriculture and transport sectors. The bank said inflation remains within its target range of 3% to 5%. We expect the Shilling to remain stable, supported by foreign currency reserves, moderate dollar demand from importers and inflows from investors, as well as diaspora remittances.<\/p>\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":" A majority of African central banks have kept their interest rates unchanged since the start of this year as the economic growth outlook is countered by inflation fears. Only a few countries, including Mozambique, Zambia and Zimbabwe, have tightened rates this year as they attempt to curb rising inflation. Even fewer have cut rates, with […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3595,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[278,249,22,296,204,205,206,207,316,209,308,309,407,408,26,27,365,32,363,364,354,396,298,299,34,397,217,300,218,357,301,192,231,33,302,252,366,398,257,409,303,304,182,305],"class_list":["post-3594","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-covid-19-tanzania","tag-eco","tag-eco-currency","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-kenya-maize-ban","tag-kenyan-shilling-rate","tag-kenyan-shilling-vs-dollar","tag-naira","tag-naira-4-dollar","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","tag-senegal-economy","tag-senegal-protests","tag-tanzania","tag-tanzania-covid","tag-tanzanian-shilling-rate","tag-tanzanian-shilling-vs-dollar","tag-uganda","tag-ugandan-shilling-rate"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3594","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=3594"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3594\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media\/3595"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3594"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3594"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}