Analysis of the Pan African foreign exchange condition showed that the performance was mixed in 2019. Over the review period, local currencies in Egypt (+11.7%), Tunisia (+7.7%), South Africa (+2.4%) and Kenya (+0.4%) strengthened, against the US dollar, thanks to increased Foreign Portfolio Investment (FPI) inflows. On the other hand, local currencies in Angola (-36.0%), Ghana (-14.0%) and Mauritius (-5.6%) weakened against the greenback.
Meanwhile, a continued intervention by the Central Bank of Nigeria kept the naira largely stable through 2019.
Notably, the Egyptian pound benefited from the dividend of recent reforms as well as increased stability which continues to buoy inflows from tourism. Also, the South African rand shrugged-off a raft of negatives headlines, notably the faltering momentum in the economy, the risk of a credit-rating downgrade to junk, and a failing state-owned electricity company. On the contrary, the Angolan kwanza suffered from the Central Bank’s continued control measures on the exchange rate since abandoning the peg to the USD in Jan-18.
Thus far in 2020, the Ghanaian cedi has strengthened up to 7.0% against the
greenback, emerging as the best performer in 2020. The strong performance was
buoyed by the country’s attractive growth story and above 10.0% real yields at the local bond market as well as a successful Eurobond issuance in Feb-2020.
Meanwhile, currencies across other SSA countries under our watch have weakened against the dollar with South Africa being the worst performer as global risk continues to rise amid the outbreak of Coronavirus which has weighed on commodity prices which account for the bulk of export earnings. Also, weak economic structure in some countries and regulatory uncertainties in others remains a headwind to currency performance in 2020.
United Capital Research | Pan African Monitor