African currencies have had an interesting run so far as a reflection of frontier market effects of global uncertainty shaping commodity price trajectory. See below currency ranker as extracted from Bloomberg:
Winners
Egypt has seen increased flows this year the highest since 2014 especially on exchange traded funds making its bourse the second best performing globally as measured by the EGX. These flows have given support to its currency which is the winner YTD all African currencies. Egypt is on a steady path to recovery post the Arab Spring. Its central bank cut rates in February improving sentiment towards assets from EM’s.
The Kenyan Shilling is a reflection of horticulture flows from high demand for roses for exports during the valentines season. The Shilling could have performed better but for the terrorist attacks that still make investors jittery hence scaling back of investor appetite due to security risk factors. The Kenyan economy’s reserve position has increased but grapples with waning credit extension following the rate caps that have made pricing risk for banks challenging.
The Malawian Kwacha has been fairly bullish as the central bank has made significant market interventions to shore up reserves and have been in open market operations. Malawi has successfully maintained 3.5 months import cover for 2 years.
The Nigerian Naira has been fairly resilient after pricing in the rising crude prices capped by political uncertainty following recent Presidential polls.
Other winners include the Guinean Franc (0.94%) and Rwandese Franc (0.83%).
Losers
The Ghanaian Cedi (GHS) has shaved 11.13% value on a year to date basis given the fiscal challenges that the cocoa producer faces. Ghana is currently on an IMF program but grapples with a widening fiscal deficit.
The Sierra Leone Leone (SLL) lost 5%, Gambian Dalasi slowed 3.24% as the Mauritian Rupee (MUR) depreciated 2.43%. The Tanzania Shilling (TZS) weakened 2.15% on the back of a decline in flows as the Angolan Kwanza was a percentage point weaker as the oil producer grapples with recovery from recession.
Angola is one of the African nations that did not allow their currency to bear the brunt of lower commodity prices a few years ago and such after the deliberate devaluations the currency was still prone to pressure. The recent oil price rise has cushioned some of the currency pressure as flows slowly improve into Africa’s second largest crude producer after Nigeria.
At 1% weaker was the Zambian Kwacha (ZMW), Ethiopian Birr (ETB) and Congolese Franc (CDF). The Kwacha has been relatively stable until a few weeks ago when dollar demand from the need to fund agriculture and petroleum sectors grew. Its Finance Ministry recently announced the copper producer’s debt position which has risen to USD$10.05 billion with an infinitesimal easing in fiscal deficit to 7.6%. The Congolese Franc (CDF) has been volatile as the market priced in political risk factors following Presidential elections and instabilities.
