• Thursday, July 25, 2024
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Naira seen retreating from highs, kwacha bull run to continue


The naira is expected to retreat from current 11-week highs against the greenback next week as importers take advantage of relatively cheap dollars to make payments.

Zambia’s kwacha should however remain bullish as local companies sell dollars for the local currency to pay taxes which are due in the week.


On Thursday commercial banks were quoting the kwacha at 6.0200 per dollar, up from 6.1200 a week ago, with traders seeing scope for further gains.

“The continued absence of any significant dollar demand should see the kwacha’s bullish run against the greenback continue,” Zanaco Bank said in a market note.

Zambia’s central bank hiked its benchmark interest rate by 175 basis points to 12 percent two weeks ago after a heavy selloff in the kwacha pushed it to an all-time low against the dollar.


The naira firmed to its strongest in 11 weeks against the dollar on Thursday, but currency traders expected it to come under import pressure next week.

They said dollar inflows from offshore investment into treasury bills and sales by state energy company NNPC boosted the local currency.

“The market is very liquid for now, but we expect that more importers will take advantage of the cheaper dollar to bring forward their obligations and this may lead to the naira depreciating next week,” one dealer said.

The naira has stabilised since last month when the central bank tightened liquidity to support the currency.


The Kenyan shilling is expected to edge weaker in the week ahead, weighed down by low dollar receipts from the tourism sector.

Banks were quoting the local unit around 86.50/60 against the dollar on Thursday, slightly weaker from 86.55/65 a week ago.

“The near term direction is for a weaker shilling because of the imbalance between the supply and demand equation,” Commercial Bank of Africa trader Joshua Anene said.

He cited significant importer interest from the energy and telecoms sectors while dollar flows from tourism were declining.

Travel agencies say attacks by Somali militant group al Shabaab are putting off potential international visitors.


The Ugandan shilling is forecast to edge higher, as demand for the currency ticks up for mid-month tax payments.

Earlier, the currency of east Africa’s third largest economy was at 2,520/2,530 to the dollar, up from last Thursday’s close of 2,555/2,565.

“The shilling is a little scarce, which means some players don’t have that much to exert demand (for dollars),” said Daniel Sage Muganzi, a trader at Centenary Bank. “Since mid-month taxes are also coming in, I don’t expect much demand from corporates.”

The shilling has been largely stable against the dollar in the year to date, partly helped by frequent intervention by the central bank to mop up excess liquidity.


Pressure on Ghana’s cedi is likely to continue easing after the central bank recently hiked reserve requirements for commercial banks to 11 percent from nine percent to shore up the currency and tame inflation.

The cedi has weakened 17 percent against the dollar since January after slumping around 20 percent last year. A bank trader said the depreciation would continue but at a slower pace, projecting an exchange rate of around 2.7800 next week.

The central bank in February hiked its benchmark lending rate by 200 basis points and tightened foreign exchange rules by banning the use of the dollar for domestic transactions.