The Kenya Shilling was the only currency which appreciated against the dollar in 2018 in the Sub-Saharan Africa region, recording a 1.4 percent appreciation in 2018 compared to a 0.7 percent decline in 2017, according to the Cytonn Investment Report.
Regional currencies registered a depreciating trend in 2018 with the major decliner being the Zambian Kwacha, which registered a 19.0percent depreciation, attributed to negative investor sentiments on the country’s debt sustainability, following the country’s ballooning debt levels, projected to have hit 69.0percent of GDP as at the end of 2018.
The South African Rand was the second largest decliner having recorded a 15.9 percent depreciation. This is in contrast to 2017 where the Rand recorded a 9.9 percent appreciation against the dollar.
The underperformances of the region’s currencies were also underpinned by capital outflows from emerging markets to advanced markets following the tightening of monetary policy, which saw the Federal Reserve raise the benchmark interest rate 4 times during the year to close the year at a range of 2.25percent – 2.5percent in its final meeting in December.
The strengthening dollar, coupled with events in the global markets, which included the trade war between China and the USA that put pressure on emerging market currencies also contributed to the underperformances of the region’s currencies.
