African currencies to stabilise against US dollar


Ghana Cedis

from OKORO CHINEDU in Lagos, Nigeria
Nigeria Bureau
LAGOS, (CAJ News) – AFRICAN currencies are forecast to hold firm against the United States dollar, marking a significant shift from the depreciation in 2023.

Stears, a leading provider of economic data and insights, predicts a year of reduced volatility and appreciation of these currencies.

Its FX Forecast predicts diminished volatility for African exchange rates throughout 2024 as the gap between US interest rates and those of emerging markets, particularly in Africa, narrows.

This projected trend is expected to result in less depreciation, with several African currencies strengthening against the dollar.

“The Nigerian naira, for instance, is expected to find stability after a difficult 2023,” Tokunbo Afikuyomi, Lead Economist at Stears, said.

The economist emphasised the role of strategic reforms in bolstering specific currencies.

Afikuyomi said despite a tough start to the year, foreign exchange (FX) reforms aimed at improving dollar liquidity and anticipated slowdown in inflation due to base effects were pivotal factors contributing to this.

He anticipates “a gradual cooling of the market by the third quarter of 2024” for the naira.

Similarly, Ghana is forecast to experience a more favourable economic climate in 2024, with anticipated improvements in growth and inflation.

The International Monetary Fund (IMF) reforms are expected to restore confidence in the economy, strengthening the Ghanaian cedi and potential appreciation against the dollar.

Afikuyomi noted positive market sentiment was also boosting the Kenyan shilling.

The recent $1,5 billion eurobond issuance on February 12 is seen injecting some optimism.

“Improved dollar liquidity, recent inflows from the IMF, and the Central Bank of Kenya’s commitment to intervene in the FX market contribute to the positive outlook for the shilling,” Afikuyomi explained.

South African currency – Rand

Stears’ forecast reflects a cautiously optimistic view of the stability of African currencies in the face of global economic challenges.

“The anticipated improvements in key economies and strategic reforms position these currencies for resilience and appreciation,” Afikuyomi said.

The Stears FX forecast encompasses a diverse array of currencies featured on its Africa FX Africa monitor, including the Angolan kwanza, Rwandan franc, South African rand and Ugandan shilling.

– CAJ News

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