INTERNATIONAL HIGHLIGHTS
The dollar strengthens against the euro
The dollar ended the week higher supported by hopes of the adoption of Joe Biden's $ 1,900 Bn stimulus plan and the approval of the Johnson & Johnson vaccine. In this regard, the EUR/USD parity fell by -0.4% over the week, going from 1.212 to 1.208.
The dollar was penalized at the start of the week by the FED President’s statements, who ruled out any immediate change in its monetary policy. In fact, the inflation risk and the rise in US bond rates fueled the higher expectations of Fed's key rates.
MAD EVOLUTION AND FOREIGN EXCHANGE MARKET LIQUIDITY INDICATORS
A foreign exchange position at a 5 month low
The banks’ foreign exchange position continue to contract to reach MAD 3.8 Bn in midweek, its lowest level since September 2020. This situation is explained by a continued inflow, widely anticipated, of import operations on the Moroccan foreign exchange market.
This week's liquidity conditions have led to a visible tightening of the spread between the MAD reference price and the central price by 32.1 BPS in one week, to -3.58%.
The dirham depreciated by -0.47% against the dollar, to 8.94 against 8.90 a week earlier. The USD/MAD parity change is explained by a market effect of + 0.33% combined with a basket effect of + 0.14%.
Towards an intensification of MAD volatility
We anticipate a visible catching-up effect of import flows over the coming weeks. This would fuel the volatility of the USD/MAD parity.
We are seeing growing interest from local importers in order to implement hedging strategies over 3-month horizons.
EUR/USD OUTLOOK – BLOOMBERG
International brokers maintain bullish forecasts for the EUR / USD parity, at levels similar to those of last week.
The EUR/USD parity would reach 1.22 in Q2-21, before moving to 1.23 at the end of 2021. By 2022-2025, it would average around 1.23.
The Fed chairman statements, expressing his commitment to keeping interest rates at their current level for another year or two, weighed on the US dollar over the short-term. While inflation expectations have been the main catalyst for the rise in BDT yields, the Fed's desire to maintain price movement moderately above 2% on the medium term is expected to drive yields lower in the US. Also, the significant increase in spending following the latest US stimulus plan is a downward factor regarding the dollar.
EUR/MAD AND USD/MAD OUTLOOK - AGR
The forecast of a greater dynamic of import flows on the Moroccan foreign exchange market, combined with an initiation of the dirham depreciation movement against the dollar and the euro during this week, encourages us to keep our MAD depreciation scenario unchanged over our forecast horizon.
The MAD is expected to depreciate against the dollar and the euro at 1.2 and 3 month horizons against current prices.
The MAD would depreciate against the dollar by 0.5%, 0.7% and 0.9% at 1.2 and 3-month horizons. The USD/MAD parity would be at 8.98, 9.00 and 9.02 in 1, 2 and 3 month horizons, against 8.94 currently.
The depreciation levels of the dirham against the euro should reach 0.4%, 0.6% and 0.8% over 1, 2 and 3 months. Therefore, the EUR/MAD pair would stand at 10.87, 10.89 and 10.91 against a current price of 10.83.
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