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Naira recoups losses; East African currencies remain stable amidst COVID-19

CBN bares teeth to end Naira spiral; expect further recouping of losses

Assurances from the Central Bank of Nigeria that it is not the verge of devaluing the Naira and that it was investigating those creating “panic” on potential charges of “economic sabotage” went some way to paring 9% declines against the dollar last week. The crash in global oil prices limiting dollar inflows had stirred speculation that the CBN could be forced to devalue. Instead, the CBN said it is working with the fiscal authorities to analyse the expected impact of coronavirus in order to respond comprehensively and ensure a stable financial system conducive for job creation and inclusive growth. The statement came after a committee set up to review the oil benchmark for the 2020 budget at $57 a barrel lowered its estimate to an average of $37, signalling lower government spending.  The CBN’s statement pulled the Naira from levels as weak as 400 per dollar to nearer 370. We foresee the Naira further recouping losses this week as the CBN shows its teeth to the market.

Double whammy awaits Rand as cuts to rates and ratings loom

Having lost nearly 4% against the dollar last week amidst South Africa’s second recession in two years, the Rand is now at the mercy of the MPC rate-setters this week and Moody’s deliberating on its threat of junk status for the country’s bonds next week. We foresee the MPC cutting interest rates by 25 to 50 basis points at the 17-19 March meeting in a bid to mitigate damage from the coronavirus crisis. That Rand negative move will be shortly followed by Moody’s review on March 27. Dismal economic readings signal further pain. PMI dropped to 44.3, the lowest reading since 2009. GDP shrunk by 1.4% last quarter and the Treasury cut its 2020 economic growth forecast to 0.9%. Having slid to 15.9726 per dollar, the Rand continues to trend weaker.

Calm in East Africa markets as pandemic subdues demand for exports and imports

In contrast to frenzied currency markets of Western and South Africa this past week, East Africa has been an oasis of relative calm. The Tanzanian shilling has been among the most stable currencies in Africa, according to the Bloomberg World Currency Ranker, depreciating by a mild 0.12% against the US dollar since the start of the year. Next door, Uganda’s shilling traded flat last week amid subdued activity on both the demand and supply sides, as the coronavirus pandemic depresses both import and export activity. Rates hovered around 3700-3710 against the dollar. We foresee a steady outlook on both Shillings in the coming weeks, helped by stable monetary and budget policies, particularly in Tanzania.

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