Kenya and Uganda's shillings are expected to strengthen against the dollar in the week ahead, helped by central bank intervention and inflows from offshore investors buying government debt.
KENYA: Kenya's shilling is seen recovering from its recent five-month low after the central bank kept its key lending rate high and introduced longer-dated repurchase agreements (repos) to take out excess liquidity. The central bank left its benchmark interest rate at 18 percent on June 5, sticking to its tight monetary stance for the sixth straight month. It also unveiled its latest weapon against possible short-selling of the shilling - longer tenor repos - to soak up excess liquidity from the market.
"Funding long dollar positions is going to be expensive seeing that the central bank will be mopping up for longer," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. Commercial banks quoted the shilling at 84.60/80 per dollar, 1.6 percent firmer than last Thursday's close of 86.00/20.
UGANDA: Uganda's shilling is expected to gain against the dollar over the next week, buoyed by tight liquidity and inflows from offshore investors participating in a Treasury bill auction. The Bank of Uganda is scheduled to sell 120 billion shillings ($48.39 million) worth of Treasury bills next Wednesday, and traders said yields were still attractive for overseas investors despite having fallen from their peak. An interest rate cut last week, which the market had feared would trigger a plunge in the shilling, has instead left the currency largely stable around 2,490, underpinned by the central bank's vow not to allow the euro zone crisis to hurt its currency.
TANZANIA: Tanzania's shilling is seen strengthening against the dollar in the days ahead, driven by expected greenback inflows from the agriculture and tourism sectors. Commercial banks in Dar es Salaam posted the shilling at 1,588/1,592 on Thursday, stronger than 1,590/1,595 a week ago.
"The shilling has been appreciating. The main reason is that there isn't a lot of demand and we have been receiving some inflows from tourism and agriculture," said Emmanuel Mwasanguti, a dealer at CRDB Bank.
NIGERIA: The naira is seen weakening further against the dollar next week as the interbank forex market is hit by dollar shortages in the face of sustained strong demand and offshore investors continue to exit the local debt market.
The naira was trading at 161 to the dollar at the interbank market on Thursday, after it slumped to a five-month low of 163.80 intraday on Wednesday, before closing at 160.90. "There is so much uncertainty in the market because of the exit of offshore investors in local debt paper and the lack of dollar flow from oil companies," one dealer said. Forex reserves are at a 21-month high of $37.64 billion, which gives the bank some leeway to defend the currency.
GHANA: Ghana's cedi could gain slightly against the dollar next week on inflows from a 200 million cedi ($106 million) 5-year bond auctioned on Thursday, traders said. "We expect the rates to remain steady next week with a slight bias for a cedi rise on the back of expected inflows," Barclays chief trader Kobla Nyaletey said. The central bank issued a 200 million cedi 3-year bond in February and another worth 300 million cedis on May 23.
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