African Currencies Defy Dollar Strength in July Ranking

According to an analysis released by an African market player in July, ten African currencies stood out against the US dollar. The ranking was based on observed changes in exchange rates and highlighted which exchange-rate regimes are holding up best to US monetary tightening.

The top performers included currencies pegged to the euro, such as the CFA franc of West Africa (UEMOA) and Central Africa (CEMAC), the Moroccan dirham, and the Tunisian dinar. These currencies often feature near the top when the euro strengthens against the dollar due to their mechanical performance being driven by that of the single currency.

Currencies managed under more flexible regimes, such as the Nigerian naira, South African rand, Kenyan shilling, Ghanaian cedi, or Tanzanian shilling, see their position depend more on capital flows, terms of trade, and the central bank's credibility on the inflation path. Recent research shows that currencies most exposed to international capital flows react strongly to global uncertainty shocks, while currencies anchored to an external peg move mainly in line with that anchor.