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Strong rand/N$ continues to eat into export earnings

Strong rand/N$ continues to eat into export earnings

THE Namibia dollar strengthened to below N$6,00 against the US dollar this week and a sustained and solid performance in the local currency over the short-term is highly likely.

This is the view of the Chief Executive of Old Mutual Namibia, Johannes !Gawaxab. On Monday, the local currency was trading at N$5, 832 against the dollar, but however yesterday, the local currency opened at N$6,054 against the US dollar, mainly inspired by a recovering greenback.Commenting on the recent appreciation of the Namibia dollar, !Gawaxab said the stronger local currency is leading to continued decline in export earnings of mining and fishing companies in particular and also does have a negative impact on job creation and job security in the country.”While it is impossible to point out specific factors leading to the Namibia dollar’s renewed strength at the close of the second quarter and this week, the fundamentally improved economic prospects, sustained economic growth path and a growing realisation of political stability in Namibia and South Africa are key to understanding the behaviour of the currency,” he said.He added that high commodity prices, still high local interest rates and the growing likelihood that global conditions would remain favourable for the rest of the year, the local currency looks set to rise even further over the short term, where after sustained economic growth in the US could support the greenback, which in turn, would lead to the softening of the Namibia dollar.!Gawaxab said the behaviour of the Namibia dollar and inflation would be key drivers of monetary authority decisions regarding interest rates.He said: “If the Namibia dollar remains firm over the next several months and the inflation remains at current levels, short-term interest rate hike can be averted.However, if demand growth and credit extension remain strong, a ‘good news’ interest rate hike could be on the cards in the second half of this year.”Another local economist, Rainer Ritter, said one of the reasons for the strengthening of the local currency was on the back of a weak US dollar, which softened after depressing economic data, especially on unemployment, released in the States last week.He added that another reason could be due to the upbeat South African economy and strong business confidence being experienced there; since the local currency is pegged to the rand.Commenting on the local inflation of 2,23 per cent for June 2004, !Gawaxab said the local inflation would appear to be in a structurally downward trend.The Namibian inflation rate was 4,09 per cent in April, 3,25 per cent in May and came in around 2,2 per cent last month.A number of closely watched inflation drivers behaved favourably and key to these positive inflation developments is the sustained strength of the local currency.Further good news on the inflation front came from the food prices.On Monday, the local currency was trading at N$5, 832 against the dollar, but however yesterday, the local currency opened at N$6,054 against the US dollar, mainly inspired by a recovering greenback.Commenting on the recent appreciation of the Namibia dollar, !Gawaxab said the stronger local currency is leading to continued decline in export earnings of mining and fishing companies in particular and also does have a negative impact on job creation and job security in the country.”While it is impossible to point out specific factors leading to the Namibia dollar’s renewed strength at the close of the second quarter and this week, the fundamentally improved economic prospects, sustained economic growth path and a growing realisation of political stability in Namibia and South Africa are key to understanding the behaviour of the currency,” he said.He added that high commodity prices, still high local interest rates and the growing likelihood that global conditions would remain favourable for the rest of the year, the local currency looks set to rise even further over the short term, where after sustained economic growth in the US could support the greenback, which in turn, would lead to the softening of the Namibia dollar.!Gawaxab said the behaviour of the Namibia dollar and inflation would be key drivers of monetary authority decisions regarding interest rates.He said: “If the Namibia dollar remains firm over the next several months and the inflation remains at current levels, short-term interest rate hike can be averted.However, if demand growth and credit extension remain strong, a ‘good news’ interest rate hike could be on the cards in the second half of this year.”Another local economist, Rainer Ritter, said one of the reasons for the strengthening of the local currency was on the back of a weak US dollar, which softened after depressing economic data, especially on unemployment, released in the States last week.He added that another reason could be due to the upbeat South African economy and strong business confidence being experienced there; since the local currency is pegged to the rand.Commenting on the local inflation of 2,23 per cent for June 2004, !Gawaxab said the local inflation would appear to be in a structurally downward trend.The Namibian inflation rate was 4,09 per cent in April, 3,25 per cent in May and came in around 2,2 per cent last month.A number of closely watched inflation drivers behaved favourably and key to these positive inflation developments is the sustained strength of the local currency.Further good news on the inflation front came from the food prices.

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