Upcoming FX Week for AZA Finance: Slump in Cedi after Moody's rating downgrade to 'junk' status
Uncensored, Statement-Style Analysis:
The currencies of African countries are experiencing a rollercoaster ride this week, with the Cedi tumbling, the Naira holding steady, and the Shilling showing mixed signals.
Ghana's Cedi took a nosedive following a downgrade of its credit rating by Moody's, sliding to 6.375 from 6.296. The rating agency painted a grim picture, stating the Ghanaian government faces an uphill battle addressing its liquidity and debt issues at a time when poor revenue generation restricts its budget flexibility. To combat this, Ghana introduced a 1.75% 'e-levy' on electronic transactions in a bid to raise extra revenue. With liquidity contracting and dollar demand surging, the Cedi is expected to remain under pressure.
Long queues are popping up at gas stations across Nigeria due to the government ordering filling stations to stop selling 'dirty' fuel that has been circulating in the country. Market analysts expect balanced supply and demand forces to keep the Naira within close range of the 570 psychological level.
Kenya's Shilling remained steady against the dollar, as dollar demand from importers was offset by supply. Elections in August and rising oil prices are set to test its resilience in the near term.
Meanwhile, Senegal's Naira is steadying as oil receipts offset dollar demand, and its economy is thriving under the European Commission's €300bn "Global Gateway" infrastructure plan. The EU is backing Senegal's green and digital transitions and providing €125m for Covid vaccination programs. President Macky Sall was recently elected Chairperson of the African Union, positioning Senegal as a frontrunner in Africa's development and attracting investors' attention.
As for Egypt, its Pound is relatively stable, trading steadily between 15.71 and 15.73 to the dollar. The UAE's First Abu Dhabi Bank offered a majority stake in Egypt's largest investment bank EFG Hermes, and the government plans to buy up to four million tonnes of wheat from local farmers this season.
In summary, African currencies are navigating through various challenges, with some finding stability against the dollar while others are feeling the strain. Investors are keeping a close eye on emerging markets like Senegal, which continue to punch above their weight despite the prevailing uncertainties. But beware, the road to prosperity is fraught with obstacles, so tread carefully, investors!
- In the business landscape, the growth of African economies is a topic of interest, with some countries experiencing volatile currency markets.
- The downgrade of Ghana's credit rating has led to a decline in the value of its Cedi, as the government grapples with liquidity and debt issues.
- To counter these financial difficulties, Ghana has implemented a new 'e-levy' on electronic transactions to boost revenue.
- Nigeria's Naira is maintaining a steady position due to a balance in supply and demand forces, despite issues with contaminated fuel in the market.
- Kenya's Shilling is steady for the moment, but upcoming elections and oil price increases may pose challenges in the near future.
- Senegal's Naira is showing resilience, with oil revenues balancing dollar demand, and the support of the EU's Global Gateway infrastructure plan boosting its economy.
- Egypt's Pound is relatively stable, with the UAE's First Abu Dhabi Bank investing in the country's largest investment bank, EFG Hermes, and the government planning to buy wheat from local farmers.
- Investors are keenly observing emerging markets like Senegal, which have demonstrated potential for growth despite the ongoing uncertainties. However, it's crucial to remain vigilant and cautious when making investment decisions due to the various obstacles ahead.
