African currencies are likely to hold their ground against the dollar next week, although Kenya’s shilling could stay under pressure after hitting near three-year lows last week.
KENYA
Traders said limited dollar flows would keep the shilling on the ropes, although this should ease off gradually with waning demand for the U.S. currency from importers.
At 1050 GMT on Thursday, commercial banks quoted the shilling at 89.20/30 to the dollar compared with 88.90/89.00 last week.
“The shilling will be under pressure, but I think if there is any weakness it will be gradual. I don’t expect it to slide aggressively as we saw (last week),” a senior trader at one commercial bank said.
The shilling has come off a trough of 89.45/89.55 reached last week, its weakest since December 2011.
TANZANIA
Tanzania’s shilling is likely to strengthen in coming days, with third-quarter tax payments seen capping dollar demand while inflows from the tourism sector should boost supply, traders said.
Commercial banks in east Africa’s second-biggest economy quoted the shilling at 1,673/1,680 to the dollar on Thursday, weaker than 1,665/1,675 a week ago.
“As we are approaching the end of the third quarter, we expect the shilling to appreciate,” said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania, citing demand from oil companies that are busy paying taxes.
“Telecoms companies are also selling dollars to pay taxes and we are seeing some U.S. dollar inflows from tourism and non-governmental organisations,” Remtulla said.
Market participants expected the shilling to trade in a fairly tight 1,670-1,675 range.
The Bank of Tanzania said on its website it had traded $49.55 million on the interbank foreign exchange market over the past week.
UGANDA
The Ugandan shilling is seen stable over the next week with a firmer bias on the back of sluggish corporate demand for foreign exchange, and likely inflows from offshore investors at a central bank auction for Treasury bills.
At 1108 GMT commercial banks quoted the shilling at 2,628/2,638, weaker than last Thursday’s close of 2,615/2,625.
“Some manufacturing firms have indicated they want to buy (dollars) at much cheaper levels,” said Faisal Bukenya, head of market making at Barclays Bank.
“I expect most to be absent from the market in the coming days which should stabilise or push the shilling slightly back (firmer),” he said.
The Bank of Uganda is due to sell 145 billion Ugandan shillings’ ($55 million) worth of Treasury bills next week.
ZAMBIA
Zambia’s kwacha is expected to remain stable against the dollar, also supported by a Treasury bill auction likely to attract foreign investors.
At 1019 GMT commercial banks quoted the currency of Africa’s second-biggest copper producer at 6.1850/dollar from 6.1750 last week.
“We see the kwacha trading within the current range. The Treasury bill auction next week might attract some foreign investors which in turn will see the unit make some gains,” one commercial bank trader said, predicting a 6.140/90 range.
NIGERIA
The Nigerian naira is likely to be supported by dollar flows from energy companies and intervention from the central bank.
On Thursday the currency traded around 163.65 to the dollar, down slightly from Wednesday’s close at 162.65, but firmer than 164.25 last week.
The naira has fallen sharply over the past two weeks, dragged down by lower global oil prices and reduced offshore flows into the debt and equity markets.
Dealers said the central bank had sold dollars directly to some lenders to try and prop up the naira.
“We are expecting increased dollar sales from some energy companies in the days ahead and hopefully, this will provide some support for the naira,” one dealer said.
