The USD/MAD parity continues its downward trend of -1.1% during the period from 14 to 18 December 2020, according to Attijari Global Research (AGR).
This development is mainly due to a significant basket effect of -0.69% compared to a market effect of -0.39%, AGR states in its latest “MAD Insights” note. The bank’s foreign exchange position reached a new annual high of MMDH 9.3 million at the beginning of the week before returning to MMDH 8.9 million, notes AGR, adding that the spread between the USD/MAD reference rate and its central rate widened to -3.4%, before recovering to -2.75% on Monday at the close.
This reversal in market liquidity is mainly explained by very large USD/MAD import flows at the end of the week, AGR analysts said.
Thus, AGR recommends to dollar importers to hedge their foreign currency future positions in order to benefit from the current price levels of the dirham, taking into account a liquidity spread at annual lows and an increased volatility of the USD/MAD parity.
“We favour optional strategies on GBP, given the high levels of volatility in the GBP/MAD parity”, the same source points out.
In a context marked by upward projections of USD/MAD import flows at the end of the year, supported by the current low levels of liquidity spread, AGR maintains its scenario of a depreciation of the dirham against the dollar and the euro by March 2020, estimating that the current trend of the USD/MAD parity should be reversed and that of the EUR/MAD parity should be accentuated.
“Indeed, we could see a narrowing of the bank’s foreign exchange position, which could tip into negative territory,” the note notes.
Thus, AGR analysts expect the USD/MAD exchange rate to rise by +1.8%, +2.2% and +2.4% over the next 1, 2 and 3 months. At the same time, the MAD depreciation amplitude would be less important against the euro, estimating that the EUR/MAD parity should rise by +0.4%, +0.7% and +0.9% over 1, 2 and 3 months.