Forex: Naira expected to edge up next week

The naira is expected to edge up next week as Nigerian National Petroleum Corporation (NNPC) starts to sell dollars.

The local currency closed at 162.75 against the dollar on Thursday compared with 162.90 at Wednesday’s close.

Traders said local unit of Chevron had sold $94.1 million, while Eni sold $7 million to some banks, boosting the supply of dollars in the market.

“The naira should gain some value next week as the market eagerly anticipates dollar sales by NNPC,” one dealer said.

NNPC sells dollars to lenders on a monthly basis and accounts for most dollars traded in the interbank market.

Traders said dollar sales by NNPC and other oil firms could see the naira strengthen to 161.90-162.5 next week.

KENYA

Concerns about political risk are likely to drive the Kenyan shilling after the opposition CORD coalition called rallies to press for dialogue with the government, starting in the capital Nairobi on Monday.

Commercial banks quoted the shilling at 87.75 to the dollar on Thursday, from 87.30 a week ago and Duncan Kinuthia, head of trading at Commercial Bank of Africa, said it is likely to trade in a range between 87.20-88 over the next week.

He said the markets had already priced in the political noise but that could change if things got out of hand.

“If sudden pronouncements are made or we have riots or any sort of violence, that obviously could impact the currency negatively,” he said.

Traders said they were also focusing on a meeting of the central bank’s rate-setting Monetary Policy Committee.

ZAMBIA

The Zambian kwacha is expected to hold steady close to the 6.2000 per dollar rate at which commercial banks quoted it on Thursday, softer from 6.1050 a week before.

“A balance between demand and supply should hold. The local unit should trade within 6.200 and 6.300,” one commercial bank trader said.

The currency of Africa’s second-largest copper producer tumbled to lifetime lows in May.

Earlier this month, the central bank raised the effective annual lending rate to 28 percent from 21 percent, a move analysts said would attract foreign investors into Zambia’s government securities.

UGANDA

Demand for dollars from commercial banks and energy sector importers means the Ugandan shilling is seen taking a bearish turn next week.

At 0949 GMT, commercial banks quoted the currency of east Africa’s third largest economy at 2,619/2,629, weaker than last Thursday’s close of 2,595/2,605.

“Banks that are short are exerting demand to cover short positions … others could be anticipating demand from the energy sector,” Crane Bank trader Ali Abbas said. “The shilling will have a weakening bias if this level of demand persists.”

The Ugandan currency has depreciated 3.4 percent this year.

Some traders say market confidence in the shilling over the medium-term is being eroded as lower yields on government debt may depress offshore demand. The Bank of Uganda will sell 135 billion Ugandan shillings worth of Treasury bills next week.

TANZANIA

The Tanzanian shilling is likely to depreciate against the dollar in the days ahead, weighed down by demand for the U.S. currency from the oil sector.

Commercial banks in east Africa’s second-biggest economy quoted the shilling at 1,662/1,670 to the dollar on Thursday, barely moved from 1,660/1,670 a week ago.

“In the short term we look at the shilling depreciating until proceeds come in from the agriculture and tourism sectors,” said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania.

“Importers and oil companies have started coming into the market to look for greenbacks after the end of the government’s financial year (June-July) … the government has been supporting the local currency but not at sufficient levels.”

Market participants said they expect the shilling to trade in the 1,670-1,680 range over the coming days.

The central Bank of Tanzania said on its website that it had traded $36.25 million on the interbank foreign exchange market over the past week.

GHANA

Ghana’s cedi is expected to be volatile next week with no sign high dollar demand from local importers is abating, traders said.

The currency of the cocoa, gold and oil exporting nation has slumped more than 30 percent against the greenback since January. It was trading at 3.2200/3.2500 at midday on Thursday.

“Same story, nothing has changed and we expect the current southward movement of the currency to continue,” a trader at Stanbic Ghana said.

Another analyst at Barclays Bank Ghana said inter-bank liquidity remained poor with no trades going on, even though greenback demand by firms continued to be very strong.

Weekly dollar sales by the central bank and local mining companies have been the main source of forex support for the cedi but these have reduced significantly in recent times.

The central bank hopes the cedi will stabilise in the fourth quarter on inflows from a planned Eurobond sale in July of up to $1.5 billion and a $1.8 billion syndicated loan to be signed in September against next year’s cocoa purchases.