Foreign Exchange

The Rand slumped to its lowest level since November, trading at 17.82 from 17.48 at last week’s close as energy shortages hamper economic activity. S&P Global’s South Africa Purchasing Managers’ Index fell to 48.7 in January from 50.2 in December, signalling a contraction in activity. The country’s capital expenditure also fell by more than a third last year as the government scaled back spending on infrastructure projects. The economy continues to be crippled by ongoing rolling power blackouts, with food insecurity and unemployment rising. We expect the Rand to continue its current downward trajectory in the short term as investors seek better alternatives.

Egypt Pound nears record low after Moody’s cut

The Pound weakened against the dollar, trading at 30.43 from 30.28 at last week’s close, continuing its slide towards its record low 30.50 hit in early January. Moody’s Investors Service cut Egypt’s credit rating one notch to B3, six levels below investment grade, citing reduced ability to deal with external macroeconomic shocks while the economy undergoes a structural adjustment towards private sector and export-led growth. Companies face deteriorating conditions as output prices rise at their fastest pace in six years and purchase cost-in ation is the highest in more than four years. We expect the Pound to continue depreciating until structural reforms start to take e ect.