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Biden rally reversal for Rand amid graft charges; Tanzania election leaves Shilling stronger

Biden rally reversal for Rand amid graft charges

After soaring to an eight-month high of 15.54 Rand per dollar amid expectations that the Biden presidency and successful vaccine trials bode well for growth and investment, the currency’s rally partially reversed as South African prosecutors issued an arrest warrant for the ruling ANC’s Secretary-General Ace Magashule on corruption allegations. The nation’s manufacturing output fell 2.6% year on year in September, while 3.2% higher month-on-month and up 32.9% for the quarter, the Statistics Agency said Tuesday. We expect the Rand to return to its recent peak in the medium term should vaccines spur the reopening of the global economy.

CBN intervention keeps Naira stable

The Naira traded in a stable range as the CBN continued to intervene, selling over $500 million to Bureau de Changes. The increase in dollar supply reinforced market stability, keeping the exchange rate steady at 464/465 per dollar. A huge backlog of dollar demand from manufacturers and foreign investors continues to put pressure on the Naira and creates a volatile situation in the foreign exchange market. Despite the continued intervention by the apex bank, traders remain in a risk-averse mood. Key support levels to watch are 475 and 450 on the flip side.

Rising Kenyan reserves to cap Shilling’s slide

 The Kenyan Shilling weakened slightly to 110.20 /110.50 levels as dollar demand from oil and merchandise importers topped FX inflows from exporters. Kenya’s dollar reserves improved for the first time since September by Sh760 million to USD 8,128 million (4.93 months of import cover) for the week ended Nov. 5, from USD 8,121 the previous week. While the CBK didn’t give a reason for the rise, the boost is most likely due to low dollar demand from importers and the past drop in global oil prices. We foresee stability in the Shilling this coming week.

Ugandan recovery points to stability for Shilling

The Ugandan Shilling strengthened to 3695/3703 levels as the economy looks poised for recovery with the reopening of mobile markets, cinemas, and gyms from Saturday, albeit subject to social distancing rules. The Ministry of Water and Environment reported that the World Bank had approved a loan of up to $230 million (Shs851b) for developing water sources for irrigation. With such inflows, we foresee stability in the local currency in the coming days.

Tanzania election leaves Shilling stronger

The Tanzanian Shilling climbed to 2304.45/2314.5 (2309.48) from 2314/2324 (2319) a week ago as signs of a COVID-19 vaccine stirred hopes of economic recovery. A report from the National Bureau of Statistics showed that inflation in October remained stable at a rate of 3.1%. President John Magufuli was sworn in on Nov. 5 after the election, amid allegations of fraud from opposition leaders. Foreign investors who stayed on the sidelines during the elections are likely to return flows to the country, driving further improvement of the Shilling against the dollar in the coming days.

Issued by AZA. This Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and is based on their understanding and interpretation of market events. AZA cannot be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.

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