Rand at post-COVID high set for more gains; Magufuli revitalization leaves Shilling weaker

Rising food prices add pressure for Naira

Nigeria’s currency weakened to 475 per dollar as currency traders funneled unmet demand from official sources into the parallel market. Downward pressure was further reinforced as the consumer price index rose from 13.7% to 14.2% amid an uptick in food prices caused by border closures, dollar restrictions, and robberies preventing farmers from producing food. As economic indicators point to an inevitable recession and increased default risk, we foresee downward pressure extending towards the 480 level.

Rand at post-COVID high set for more gains

The Rand rallied to its highest levels since the outset of the pandemic, reaching a high of 15.31 from 15.65 last week, after successful clinical trials of Moderna’s coronavirus vaccine boosted risk appetite. Having recorded the highest number of COVID cases on the African continent, optimism about a vaccine stoked hopes of recovery for South Africa’s economy. We project further gains in the near term.

Kenyan Shilling may rebound amid second wave

The Kenyan Shilling weakened against the dollar, falling to a low of Sh110, as high demand for imported fuel and industrial raw materials exceeded reduced export inflows. The weaker Shilling has continued to lift the cost of living by increasing the cost of imported goods and fuel. Looking ahead, a second wave of coronavirus cases and global lockdowns is likely to reduce imports into the country while a weaker Shilling provides a boost for exporters. We therefore foresee a stable Shilling in the coming days.

Uganda’s stable Shilling may be heading lower

The Ugandan Shilling remained stable, trading at 3695/3703 per dollar. But with manufacturing, construction, tourism, hotels, trade and transport all affected by the pandemic, and the forthcoming January 2021 general elections weighing on business activity, we expect further negative impact. We foresee more pressure on the Shilling this coming week, albeit mitigated by support from some investors seeking to participate in Treasury auctions.

Magufuli’s revitalization plan leaves Shilling weaker

The Tanzanian Shilling fell to levels of 2314/2324(2319) from 2304.45/2314.5 (2309.48) a week ago. The weakening is the result of increased dollar demand from importers, especially in the energy sector, as the country normalizes economic activities after the elections. President John Magufuli emphasized revitalisation of the national economy in the next five years through a focus on agriculture, livestock, fisheries, industry, mining, trade, and tourism. We foresee high import demand outweighing support from inflows from tourism sectors and agricultural products, driving the Shilling weaker in the coming week.

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