Soft N$ could boost exports

THE weakening of the Namibia dollar against major currencies during the first five months of the year should be considered a positive trend for job creation, job security, and for the export and local manufacturing sectors, Old Mutual Chief Executive Officer Johannes !Gawaxab says.

The local currency weakened by about 16,60 per cent against the US dollar between January and May and, according to !Gawaxab, further moderate easing of the Namibian dollar is expected. The consensus forecast for the US$/N$ exchange rate by year-end is between 6,20 and 7,00.On Friday, the local currency was pegged at 6,8330 against the greenback.Movement in the US dollar – if it continues strengthening – and the euro (weak) will be a key determinant on the fortunes of the local currency.”The future direction of the Namibia dollar remains uncertain and will to a large extent depend on the fortunes of the US dollar.Although the US dollar looks like it should weaken against the Asian currencies, the euro/US$ exchange rate increasingly looks like it’s heading in the opposite direction.”The longer-term factor against the dollar – unsustainable current account deficit – for the moment appears to be countered by stronger growth coupled with higher interest rates than Europe.”!Gawaxab says the recent weakness in the euro also contributed to the depreciation of the Namibia dollar.Last year the Namibia dollar strengthened by 13,9 per cent against the US dollar for the twelve months to December 2004, which created difficulties for the local export market.Earnings of fishing, mining and manufacturing companies in the country were negatively affected.Factors supporting the local currency appreciation were the weak US dollar, strong capital and portfolio flows and firm commodity prices.”We believe the monetary authorities will not lean against a weakening Namibia dollar by raising interest rates unless absolutely forced – rather they will lean towards lower real interest rates,” said !Gawaxab.The consensus forecast for the US$/N$ exchange rate by year-end is between 6,20 and 7,00.On Friday, the local currency was pegged at 6,8330 against the greenback.Movement in the US dollar – if it continues strengthening – and the euro (weak) will be a key determinant on the fortunes of the local currency.”The future direction of the Namibia dollar remains uncertain and will to a large extent depend on the fortunes of the US dollar.Although the US dollar looks like it should weaken against the Asian currencies, the euro/US$ exchange rate increasingly looks like it’s heading in the opposite direction.”The longer-term factor against the dollar – unsustainable current account deficit – for the moment appears to be countered by stronger growth coupled with higher interest rates than Europe.”!Gawaxab says the recent weakness in the euro also contributed to the depreciation of the Namibia dollar.Last year the Namibia dollar strengthened by 13,9 per cent against the US dollar for the twelve months to December 2004, which created difficulties for the local export market.Earnings of fishing, mining and manufacturing companies in the country were negatively affected.Factors supporting the local currency appreciation were the weak US dollar, strong capital and portfolio flows and firm commodity prices.”We believe the monetary authorities will not lean against a weakening Namibia dollar by raising interest rates unless absolutely forced – rather they will lean towards lower real interest rates,” said !Gawaxab.