African currency outlook

The Kenyan and Ugandan shillings are both seen under pressure next week, with the Kenyan currency likely to flirt with a record low against the dollar, due in part to central bank foreign exchange buying.
KENYA Kenya's shilling is seen falling towards an all-time low of 86.70/80 against the dollar, pushed down by central bank purchases of foreign currencies and strong dollar demand from oil importers, traders said. The Central Bank of Kenya (CBK) bought a total of 14 million euros over three consecutive days this week, pushing the local currency towards its March 15 record low.
It was quoted at 86.35/45 against the dollar, weaker than 83.80/90 at last Thursday's close. "We are looking at 86.50 now," said one Ecobank trader. "If the central bank comes in again we might even see 87.00 next week." Traders said demand for the dollar from oil importers was still heavy, outweighing scant inflows from the tea sector, Kenya's leading foreign exchange earner last year.
UGANDA Uganda's shilling is expected to stay under pressure, with traders keeping an eye on protests over high food and fuel prices, and with the energy and construction sectors keeping up demand for dollars. The shilling closed at 2,384/2,389 on Wednesday, slightly weaker than last Thursday's close of 2,380/2,385. The shilling hit a lifetime low of 2,422 against the dollar on March 16.
Traders said the currency was likely to trade in the 2,380-2,397 range in coming days, although a resumption of violent protests against soaring prices could trigger a more aggressive selloff.
TANZANIA Tanzania's shilling may gain some ground after nearly two months of gradually declining against the dollar towards a long-standing support level of 1,520 against the greenback. Commercial banks quoted the local currency at 1,515/1,520 to the dollar compared with 1,509/1,515 a week ago and dealers said it would be likely to move in a 1,500-1,510 range over the next week.
The vague prospect of dollar inflows could cause the local currency to strengthen, dealers said. In the week to Wednesday, Tanzania's central bank traded $29.15 million on its interbank foreign exchange market, according to statistics on its website.
ZAMBIA The kwacha is expected to depreciate against the dollar due to the weakening euro and South African rand. Commercial banks quoted the currency of Africa's largest copper producer at 4,760 against the dollar, down from last week's 4,720.
The kwacha has traded between 4,800 and 4,600 for most of this year. During 2010, it met firm resistance at 4,600. On the few occasions it breached that level, it went on to test, but failed to breach, 4,550.
NIGERIA The naira may weaken beyond a two-month low against the dollar hit this week, with dealers predicting a foreign currency shortage if the central bank does not step in with greater foreign exchange sales. It was trading on Thursday at 156.80 to the dollar from its Wednesday close of 157.10 due to sales of about $50 million by a unit of Exxon Mobil. Dealers said the naira would ease further next week, back to the 157-157.80 range due to a lack of dollars, if the central bank did not increase supply at its bi-weekly foreign exchange auctions.