Leading frontier African currencies are expected to hold steady against the dollar next week during thin end-of-year trade, although bad weather in Europe may undermine them slightly.
KENYA The Kenyan shilling was expected to remain stable against the dollar due to low demand for the US currency as most corporate clients are closed for the holiday season. However, bad weather in Europe disrupting air travel and hitting tourist arrivals may mean lower-than-normal supplies of foreign currency, putting pressure on the local unit.
Commercial banks quoted the shilling at 80.55/75 to the dollar, compared with last Thursday's close of 80.40/50. "I don't expect much activity since most companies will have closed. Markets will be very subdued," said Andrea Balongo, a senior trader at Kenya Commercial Bank. "However, if the weather conditions do not improve in Europe, it will continue to affect supply, hence weakening the shilling."
Traders said they expected the shilling to trade in the 80.50-80.75 range in coming days. "We still hold the view that the slackened activity during this festive season will restrict wild moves beyond 80.35-80.75," Commercial Bank of Africa said.
TANZANIA The Tanzanian shilling weakened on Thursday due to panic buying of the US currency, but traders expect it to remain steady in coming days. Commercial banks quoted the shilling at 1,460/1,475 to the dollar compared with 1,426/1,434 a week ago.
"The shilling has depreciated sharply due to panic buying. There is a perception that the shilling usually appreciates towards the end of the year, so everyone was in the market picking up dollars," said Msafiri Absolom, a trader at Tanzania Investment Bank. Traders said the shilling would likely trade in the 1,460-1,470 range.
"This is the quarter-end, month-end and year-end all combined in one, so demand for dollars is not that much. Most corporates should be looking for shillings to pay taxes," said Hadija Osman, a trader at African Banking Corporation Tanzania. Between last Wednesday and Thursday, the central Bank of Tanzania traded $52.2 million on its Interbank Foreign Exchange Market.
UGANDA The Ugandan shilling is likely to stay stable in the week ahead in a tepid market. Commercial banks quoted the local currency at 2,300/2,305 to the greenback, compared with last Thursday's close of 2,302/2,305. "As we move closer to Christmas, activity is drying up and naturally the shilling is flattening against the dollar," said Kenneth Kitungulu, a trader with Standard Chartered Bank Uganda. On Wednesday, the shilling depreciated from 2,291-2,296 to 2,301/2,306 on the back of interbank buying.
NIGERIA The naira is likely to remain stable against the dollar next week on expectations of month-end foreign exchange inflows from the state-run energy firm NNPC and foreign oil companies. The local currency was trading at 152.40 to the dollar in early Thursday from 152.95 on Wednesday as demand for the greenback slowed.
"We are only attending to unconfirmed letters of credit, which the current inflows from energy majors would readily take care of," one dealer said. Traders said more dollar inflows from NNPC and ExxonMobil could boost liquidity in the system and help keep the local unit within the 152 naira to the dollar band next week. The central bank closed its bi-weekly foreign exchange market, which supplies the bulk of domestic hard currency needs for the year last week, leaving the interbank market the only source of foreign exchange until the end of the year.
ZAMBIA The kwacha is expected to remain flat during the end-of-year holiday week. Commercial banks quoted it at 4,685 to the dollar on Thursday compared with a close of 4,630 a week ago.
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