While the political turmoil in Ivory Coast (C?te d'Ivoire) is still unresolved, the West African CFA franc (XOF) has been sent on an upward surge since Jan 2011. From a low of 1 USD = 508.73 XOF on 9th Jan 2011, the XOF has now appreciated to 1 USD = 460.04 XOF, or 1 CPF franc = 0.002174 US Dollar. This is a 9.57% increase within a short span of 3 months.
Note that the West African CFA franc (XOF) carries the same currency value as the Central African CFA franc (XAF), which is used commonly in some central Africa nations.
Most Forex traders would be questioning why the XOF does not depreciate despite the situation in Ivory Coast unfolding. Similar to the Euro, the XOF is a actually a currency shared by a grouping of countries, which also include Benin, Burkina Faso, Guinea-Bissau, Mali, Niger, S?n?gal and Togo. Thus, while there may be impact on XOF by political uncertainties in Ivory Coast, it could be negated if the financial foundation of currency vis-a-vis the remaining 7 countries remain strong. In addition to that, the XOF is logically tied in value to the XAF (used by 6 central African nations), giving a further stabilising effort on the currencies of both XOF and XAF.
With Laurent Gbagbo currently negotiating a surrender, it is expected that Alassane Ouattara, the United Nations (UN) recognised elected new president of Ivory Coast will soon be able to inherit his administrative powers and bring about sweeping political and economic reforms. Assuming that none of the related countries sharing the XOF and XAF has more political uprising, the reforms that will be implemented by Ouattara, along with the international recognition and confidence in Ivory Coast will translate to the general region.
It is forecasted that the XOF and XAF will further appreciate and trade at 1 USD = 440.0 XOF by end of 2011, and to 1 USD = 430.0 XOF by middle of Jun 2012. While much of this is dependent on the political situation in Ivory Coast to be resolved soon, we are quietly confident that this will happen.
The unrest in Africa and Middle East had also dampened the appetite of global investors in corporate stocks of MNCs and government bonds. As such, it is widely expected for the price of gold to rise. Mali, one of the countries using XOF, is the world's third largest exporter in gold and along with the rest of the African nations, is likely to see strong income from gold export, further strengthening the currency of the XOF.
Looks like it may turn out to be a blessing in disguise for Ivory Coast and the rest of African nations.
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