As such, any currency impact should be minimal. First, we do not expect other market interest rates to be much changed as a result of this move.
The increased borrowing requirement announced in the recent Budget should continue to provide some support to T-bill and bond yields.
Second, despite a widening current account deficit, private capital inflows into Kenya remain healthy and more than sufficient to finance the deficit.
In a move that was not entirely unexpected (we have long awaited the start of the Botswana's medium term interest rate easing cycle - the only uncertainty was whether recent SARB tightening would delay the start of the easing cycle) Botswana reduced its bank rate by 50 bps but warned of the possibility of higher regional inflation near term.
Although further easing is still expected in this cycle, the risk of higher inflation in the coming months may mean that Botswana's interest rates are on hold for a while.
This should help preserve the BWP's yield advantage vs. the ZAR. Moreover, should the ZAR succumb to any generalised EM weakness, expect the BWP to appreciate against the ZAR while depreciating against other components of the pula basket.
Ghanaian inflation rose to 11 percent y/y in May, reinforcing the need for a stronger currency to help contain the inflationary fallout stemming from Ghana's energy crisis.
While the authorities expect that conversion of foreign currency balances back into cedi following planned GHC redenomination (planned for July 1st) will lead to further GHC appreciation, news of a 'significant' oil discovery in Ghana, estimated at 600 mn barrels, may also add to the currency's near term appeal.
