Here is some market commentary around African currency performance year to date and on a 12 month rolling basis exposing winners and losers for each faculty.
Winners year to date. The Ghanaian Cedi (GHS) started 2020 on a bullish note sprinting 6.75% with the Egyptian Pound rallying behind 2.35% stronger. Ghanaian fundamentals post completion of a successful IMF program have reflected resilience while the Bank of Ghana was awarded best central bank of the year by the ‘central banker’ on very sound monetary policy management in a period marred with challenges. Egypt’s recovery path is progressing well post the Arab Spring with confidence and flows flowing into North Africa’s largest economy. With assistance from the IMF totaling $12billion and flows from neighboring Arabic nations in loans the capital market flows are yielding fruit and this is reflecting in a stronger Egyptian Pound (EGX). One currency that can not be ignored is the Rwandese Franc (RWF) that is trading 0.54% stronger given the fast growing pace in the Dubai of Africa which is one of the fastest expanding hotspots on the continent attracting flows in foreign direct investment. The World Bank even issued a Rwandese Franc denominated bond local currency bond on the London Stock Exchange (LSE) increasing visibility and liquidity of Rwandese government paper which currently is only traded by 4.8% of offshore investors.
Winners on a 12 months rolling basis. However on one year horizon the Egyptian Pound (EGX) is the winner sprinting 11.82% while the Tanzania Shilling is trading 2.07% stronger.
Losers year to date.The South African Rand (ZAR) grapples with sentiment and sell off pressure exacerbated by rolling black outs that have weighed private sector growth in the midst of political squabbles that have suppressed growth in Africa’s most industrialized economy. South Africa for the longest of time has grappled with igniting growth as interest rates and inflation push higher. Its neighbor Mozambique has a currency trading 4.51% weaker as economic woes persist in a debt laden nation whose investor confidence was once weighed by inconsistencies in disclosure but now cushioned by gas fortunes to soon bear fruit. Mozambique still has a dark cloud that haunts its economic climate following debt restructures on its 2023 (former tuna fish bond) that it once defaulted on whose dollar bond credit default spreads were once the worst in Africa but were recently surpassed by Africa’s second largest copper producer Zambia. Red metal producers currency the Kwacha (ZMW) has shaved 4.51% in losses year to date weighed by rising dollar demand for agriculture, energy funding in an environment weighed by thin reserves that reflect 1.8 month of import cover. The Zambian central bank has become the largest off taker of dollars as it aims to shore up reserves alongside other interventions such as buying bullion from gold sellers in various districts. Until this materializes currency pressure will persist from external debt service for commercial loans and dollar bond coupons falling due with the $750million falling due in 2022. At par with the Kwacha in weakness was the Botswana Pula (BWP) that is year to date trading 4.51%. The Mauritian Rupee (MUR) and Angola Kwanza (AOA) are weaker 2.42% and 1.88% respectively.
Losers on a 12 months rolling basis. On a years rolling basis the Angolan Kwanza took the biggest knock of 35.8% which is more a deliberate weakness in devaluation of currency rather than depreciation which a stance the Banque Nationale de Angola (BNA) takes to align its currency to commodity fundamentals. The Zambian Kwacha extended losses 19.27% as the Sierra Leone Leone (SLL) was 11.92% while the Ethiopian Birr was 10.92% weaker. Other currencies that extended losses as part of an emerging market sell off were the Mauritian Rupee (MUR), South African Rand (ZAR) and Rwandese Franc (RWF) by 7.79%, 6.2% and 4.84% respectively.
The Kwacha Arbitrageur.
