Uncertainty surrounds trade on naira, others mixed

Uncertainty surrounds trade on the Nigerian currency after the central bank scrapped its bi-weekly foreign exchange auctions, while other African currencies are seen mixed.

NIGERIA

The central bank says its latest action would curb speculation on the local currency, which it blames for the sharp decline of the naira, while a market body said the bank would sell dollars at 198 naira.

The average rate at the interbank market was at 197.50 to the dollar at the close of trading, from 205.60 a week ago.

The currency of Africa’s biggest economy – and the continent’s top oil producer – has lost more than 20 percent in the past three months as oil prices collapsed and concern grew among investors about political stability after the six-week postponement of the Feb. 14 elections.

“We intend to take a cue from where the central bank intervene at the market hence,” one dealer told Reuters.

KENYA

The Kenyan shilling is expected to trade in a tight band against the dollar next week due to support from a drop in importer dollar demand and inflows into local markets.

The shilling was trading at 91.30/50 on Thursday and traders said it was likely to be hemmed in a range of 91.25-91.75.

“There is… some improvement in dollar flows chasing various asset classes,” said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

Investors abroad have been chasing high yields on local bonds and fuelling a rally in shares.

Kenya’s central bank said on Thursday the shilling had stabilised and was now seen strengthening.

TANZANIA

The Tanzanian shilling could come under pressure due to dollar demand from importers, and trader expected the currency to trade in the 1,850-1,860 range over the coming days.

Commercial banks in east Africa’s second-biggest economy quoted the shilling at 1,848/1,858 to the dollar on Thursday, weaker than 1,825/1,835 a week ago.

“The only hope for the shilling is the expected sales of dollars by corporates to meet salary and tax obligations,” Kelvin Kisenga, a trader at CRDB Bank.

The central bank said it had traded $51.1 million on the interbank foreign exchange market over the past week.

Read also: Kuwait’s Agility targets Nigeria, others in $100m expansion drive

UGANDA

The Uganda shilling is seen stable, after falling 3.1 percent weaker against the dollar so far this year, underpinned by a local currency squeeze that was dampening dollar demand.

At 0931GMT commercial banks quoted the shilling at 2,860/2,870, stronger than last Thursday’s close of 2,865/2,875.

“The yields on our papers have also kept their upward trend… I expect it to lift the confidence in the shilling,” Ahmed Kalule, trader at Bank of Africa.

At this week’s Treasury bill auction rates rose across all tenors, extending a months-long trend.

GHANA

Ghana’s cedi is expected to rally on offshore inflows for a three-year bond and renewed hopes of a deal with the International Monetary Fund (IMF).

The local currency traded at 3.4500 by 1100 GMT on Thursday.

The local currency slumped 31 percent last year, and has been under pressure since mid-January on rising dollar demand.

“We expect foreign interest in the three-year bond to lead the cedi’s gains,” Biggles Joseph Amponsah of the Accra-based Dortis Research said, referring to a bond sale on Thursday.

“We expect investors to want to lock in some funds ahead of an IMF deal, which could see interest rates drop afterwards.”

ZAMBIA

The kwacha is expected to remain under pressure and could be supported by central bank intervention.

At 1051 GMT, commercial banks quoted the currency of Africa’s second-largest copper producer at 7.0350 per dollar, down from 6.6900 a week ago.

“A bearish trend is likely to continue for the local unit in the short-term,” Zambia National Commercial Bank said in a note.

The kwacha hit a session low of 7.0700 on Wednesday for the first time in eight months as investors fretted about a tax row between the government and foreign mining companies and weak copper prices.