A stronger national currency benefits more than just traders who keep a close eye on the foreign exchange market; in practice, it benefits all stakeholders in the economy.
According to an article in Business Insider Africa, a stable currency can reduce the cost, in local currency, of imported goods, ranging from petrol and technology to medicines and raw materials.
Currencies can appreciate for different economic reasons, as demonstrated by the recent cases of South Africa and Uganda.
In Uganda, the shilling has been appreciating due to the inflow of foreign currency from charitable organisations and exporters of raw materials. Reuters reported on 20 August that the Ugandan currency was trading at between 3,715 and 3,725 shillings to the dollar.
The South African rand also appreciated, reaching levels higher than those recorded in recent months.
On 21 August, the rand reached its highest level since the start of the war between the United States, Israel and Iran, driven by rising gold prices and the depreciation of the US dollar, according to Reuters data.
At the end of last week, the South African rand was trading at 15.9925 to the US dollar, around 0.8 per cent higher than the previous session’s close.
A stronger currency means that companies need fewer units of the domestic currency to pay for imports priced in dollars. For African countries that import oil, machinery, technology, equipment and industrial raw materials, this can translate into significant savings.
Cheaper imports can help businesses avoid passing on rising costs to consumers. This is particularly relevant for governments seeking to keep food, transport and other everyday costs under control.
When a currency remains stable, the benefits can extend beyond the foreign exchange market to businesses, public finances and household budgets.
Below are the African countries with the strongest currencies in August, according to data from the Forbes calculator.
Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/?p=536015&preview=true
