Nigeria’s naira should glean support from oil companies exchanging dollars next week, while the Central Bank of Kenya’s liquidity operations are seen offsetting weakness in the shilling.
NIGERIA
The naira is expected to claw back some lost ground as oil companies buy local currency to meet domestic obligations in Africa’s largest economy.
The local unit closed at 162.80 to the dollar on the interbank market on Wednesday, weaker than Tuesday’s close as month-end dollar sales by oil firms disappointed, dealers said. Markets were closed for a national holiday on Thursday.
Traders expect the naira to strengthen to around 162 next week.
“We see the naira gaining some ground next week in anticipation of more dollar inflows from oil companies before the end of the month,” one dealer said.
Offshore buying at a planned sale of treasuries next week should also support the naira, dealers said.
GHANA
Ghana’s cedi is expected to remain under pressure mainly from unmet dollar demand from local importers, analysts said.
The currency of the cocoa, gold and oil exporting nation has declined around 27 percent since January. The cedi hit a record low of 3.0600 per dollar on Thursday.
Analysts say the cedi’s decline should continue unless the local interbank market is able to meet outstanding greenback demand. “For as long as participants know that there is currently about $1 billion of unmet demand, the supply response is not going to come through as quickly as it should,” said Razia Khan, head of African research at Standard Chartered Bank.
Bank of Ghana governor Henry Wampah said the cedi’s recent decline was fuelled by speculators, without giving details.
Wampah said the bank was reviewing its currency interventions, adding that he expected the cedi to stabilise by the third quarter.
KENYA
The Kenyan shilling is expected to trade in a tight range next week, with any weakening due to importer demand countered by the central bank through sale of dollars and liquidity mop-ups, dealers said.
At 0930 GMT, commercial banks quoted the shilling at 87.70/90 to the dollar, compared with last Thursday’s close of 87.80/90.
“I don’t expect much change. End-of-month demand is diminishing. Market players are also very aware of central bank intervention,” said Andlip Nazir, a senior trader at I&M Bank.
On Tuesday, the shilling tested the psychologically important 88/dollar level but failed to break it amid speculation that the central bank was selling dollars.
The shilling has remained firmer than the 89/dollar level it hit in January 2012.
“It’s a back and forth. We have seen the central bank come to sell (dollars) every time we go past the 88 level. But we have also seen resilient corporate demand,” said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
“It sort of counters each other and that’s why we have seen some relative stability. We have not broken out of this 87.70-88.10 range.”
However Kinuthia also saw a likelihood that the shilling will come under pressure, although not past 88.50, as customers anticipate its weakening especially due to reduced tourism sector earnings.
TANZANIA
Demand from oil importers in east Africa’s second-biggest economy is expected to keep the Tanzanian shilling under strain, with dealers forecasting a 1,660-1,670 trading range over coming sessions.
Commercial banks in Tanzania quoted the shilling at 1,657/1,667 to the dollar on Thursday.
Dealers said pressure should ease in a few weeks.
“There is a possibility that pressure on the shilling could be reduced in mid-June when the cotton export season kicks in and the market receives significant inflows of the U.S. currency,” said Theopistar Mnale, a trader at TIB Development Bank.
The central bank said on its website it traded $46.4 million on the interbank foreign exchange market over the past week.
UGANDA
Uganda’s shilling is seen trading with a defensive tone over the next week, undermined by falling yields on government yields.
At 0932 GMT commercial banks quoted the currency of east Africa’s third largest economy at 2,550/2,560, weaker than last Thursday’s close of 2,525/2,535.
“The market has received a lot of demand (for dollars) from offshore players and the shilling is taking in pressure,” said Faisal Bukenya, head of market-making at Barclays Bank.
“We might see an overall bearish tone going forward if this pressure keeps the current momentum going, especially against a background of low yields on government securities.”
However the central bank is likely to keep close watch and could come into the market if the shilling weakens past 2,570, Bukenya said.
Market players say the shilling, which is down 1.2 percent against the greenback so far this year, might also be on the ropes in the next few weeks as the 2013/14 (July-June) fiscal year draws to a close.
The government typically rushes to pay arrears around this time, increasing liquidity in the market and igniting pressure on the local currency.
Reuters
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