Zambian Kwacha to lead African currencies appreaciating in 2010-ABSA

kwachaMajor African currencies, except for Angola’s kwanza and Ghana’s cedi, will strengthen against the dollar in 2010 as a rebound in the global economy boosts prices of the region’s commodity exports, according to Absa Capital.

Zambia’s kwacha will lead the gains, appreciating 14 percent to 4,095 per dollar by end-2010 on an advance in copper, which accounts for about 70 percent of the country’s exports, Absa predicts. The currency has strengthened 3.2 percent in 2009 to 4,640 per dollar yesterday after declining 19 percent in 2008. Tanzania’s shilling may gain 8.1 percent as gold climbs.

“The story of Africa is still the story of commodities,” Ridle Markus, a sub-Saharan Africa strategist at Absa, owned by Barclays Plc, said by phone from Johannesburg. “African currencies might show a surprise recovery next year if the global economy recovers and the commodity cycle continues to show upside.”

African currencies from Nigeria’s naira to Angola’s kwanza slumped last year as the global recession eroded demand for commodities. Crude prices have gained 60 percent in 2009 while copper has doubled and gold, which accounts for 32 percent of Tanzania’s exports, according to Absa, reached a record high. Economic growth in Africa is expected to rebound to 4 percent in 2010 from 1.7 percent this year, the International Monetary Fund said Oct. 1.

The shilling of Tanzania will appreciate to 1,210 per dollar next year, from 1,308.50 at yesterday’s close of trading. The currency lost 12 percent last year. Gold prices have increased almost 20 percent since December.

Uganda, Nigeria

Uganda’s shilling may appreciate 6 percent in 2010 to 1,800 per dollar by year-end as investment in newly discovered oil deposits in the east African nation boosts the currency, Markus predicts. London-based Tullow Oil Plc said Oct. 2 it expects to produce about 150,000 barrels of oil per day in Uganda within five years.

“There’s a lot of investment coming into Uganda because of the oil story,” said Markus. “In a small frontier market that can have a big influence on the currency.”

Nigeria’s naira has “stabilized” and is likely to end next year at about 145 per dollar, 1.6 percent stronger than 147.25 yesterday. The naira has lost a fifth of its value since November 2008 when the central bank began limiting supplies of dollars to commercial lenders following a slump in oil revenue.

Kwanza Weakness

“We see the naira trading sideways for the foreseeable future, unless the there’s a significant improvement in the oil price,” said Markus. Absa expects oil, which reached a record $147.27 per barrel in July 2008, to average about $84 a barrel in 2010, compared with an average $57.54 a barrel so far this year, Markus added.

The only African currency that faces “significant” depreciation is Angola’s kwanza, which may decline “toward the black-market rate” of 100 per dollar by the end of this year, said Markus.

The kwanza slumped 9.1 percent to 85.08 per dollar through yesterday after an Oct. 2 decision by the central bank to abandon the currency’s peg due to a drop in oil earnings. Oil prices are still down 52 percent from their record reached in July last year.

“There’s potential for further weakness in the kwanza because there’s still a shortage of dollars in the market,” said Markus.

Ghana’s cedi, which has weakened more than 12 percent this year to 1.4525 per dollar, may extend the decline to 1.50 by the end of 2010, Absa predicts.

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