Namibian dollar losing value

PHILLEPUS UUSIKUDuring the second quarter of 2020, the Namibia dollar depreciated on average against all major trading currencies both on an annual and quarterly basis.During the second quarter of 2020, both the nominal and real effective exchange rate depreciated significantly, compared to the preceding quarter and corresponding quarter of 2019, this is according to the Bank of Namibia (BoN) quarterly bulletin report.Exchange rate is the price of one currency expressed in terms of another currency. Real exchange rates are inflation adjusted nominal exchange rates, while nominal exchanges rates are not adjusted for inflation.Inflation is the increase in the prices of goods and services which reduces the purchasing power of the domestic currency relative to other currencies. Therefore, a depreciation in the domestic currency makes imports expensive and exports cheaper when trading with other countries.According to the Bank of Namibia (BoN), the Namibia dollar and South African rand weakened as demand for emerging market currencies slowed on the back of growing concerns over the impact of Covid-19. Investors are risk averse and fled to safe haven assets on fears of a second wave of global Covid-19 infections. A risk averse investor prefers lower returns with known risks rather than higher returns with unknown risks.Therefore, the Namibia dollar and South African rand depreciated on average by 24.8 percent against the US dollar, by 20.4 percent against the British pound and by 22.1 percent against the euro over the year to the second quarter of 2020, BoN says.Similarly, on a quarterly basis, the Namibia dollar on average depreciated by 16.9 percent against the US dollar, by 13.4 percent against the British pound and by 16.6 percent against the euro.CompetitivenessThe Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate both depreciated on an annual and quarterly basis, during the second quarter of 2020. On an annual basis, both the NEER and REER index depreciated by 5.2 percent and 5.3 percent, respectively. The annual depreciation of the NEER was due to the weakening of the Namibia dollar and South African rand against major trading currencies, BoN says.The Namibia dollar and South African rand weakened as demand for emerging currencies slowed on the back of growing concerns over the impact of Covid-19 during the review period. Likewise, on a quarterly basis both the NEER and REER index depreciated by 6.8 percent and 7.2 percent, respectively during the second quarter of 2020. The decrease in the REER index signals an increase in competitiveness of Namibia’s products in foreign markets, BoN pointed out. -pkuusiku@gmail.com

Namibian dollar losing value

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Namibian Sun 2025-06-18

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Namibian dollar losing value

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Namibian Sun 2025-06-18

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