The Kenyan shilling and the Nigerian naira are expected to weaken against the dollar in the next week to Thursday, while the Ghana Cedi is expected to strengthen, traders said.
KENYA: The Kenyan shilling is seen weakening on increased importer demand for dollars, especially from the oil sector, as the cost of credit declines after policymakers eased the key interest rate. At 0855 GMT, the shilling was posted at 84.45/65 per dollar, barely changed from last Thursday's close of 84.40/50 when the central bank cut it key interest rate by a record 350 basis points rate cut to 13 percent.
"In the last two days we've seen increased demand from importers which, if left unchecked, could push the shilling to the 85.00 key support in coming days," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. Traders said the shilling, which is up 0.7 percent in the year to date helped by a tight monetary stance adopted by policymakers for most of this year, faced a downside risk after last week's rate cut. Typically, low interest rates make credit cheaper for importers and easier for commercial banks to hold long dollar positions, putting the shilling under pressure.
UGANDA: The Ugandan shilling is forecast to trade rangebound but could depreciate on the back of a slowing appetite among offshore investors for Ugandan government securities. At 0955 GMT, commercial banks quoted the currency of east Africa's third-largest economy at 2,500/2,505, stronger than last Thursday's close of 2,510/2,520.
"There's low trading activity and because of diminishing offshore interest in our debt we're seeing dollar supplies becoming very tight," said Denis Mashanyu, trader at Standard Chartered bank.
The yield on the benchmark 91-day Treasury bill fell to 12.9 percent at the last auction on September 5, from a 2012 high of 23.4 percent in January. At this week's auction, the weighted average yield on the 3-year bond fell to 11.8 percent from 15.2 percent at the last auction. Bank of Uganda cut its key lending rate to 15 percent in September from 17 percent in August to spur credit and economic growth.
TANZANIA: Tanzania's shilling is seen remaining stable in the days ahead thanks to inflows from agriculture and a slowdown in demand for the US currency. Commercial banks in Dar es Salaam quoted the shilling at 1,569/1,575 to the dollar on Thursday, stronger than 1,571/1,581 a week ago.
"There is a liquidity squeeze on the local currency and I don't see any concrete demand for dollars," said Eric Chijoriga, a dealer at NBC Bank, a unit of South Africa's Absa Group. Traders said they expect the shilling to trade in the 1,560-1,570 range in the coming days. The Bank of Tanzania said on its website that it traded $31.3 million on the interbank foreign exchange market over the past week.
NIGERIA: The Nigerian naira could weaken to around 158.90 to the dollar next week except if there are major dollar inflows from oil companies and offshore investors buying local debt. The naira was trading at 157.90 to the dollar on the interbank market at 1038 GMT on Thursday, firmer than the 158.05 a dollar it closed at on Wednesday.
Traders said the inflow of about $100 million from a unit of Royal Dutch Shell provided support for the naira on Thursday. The naira has been hovering at around 157-158 level in the last two weeks, owing to dollar sales by the state oil company, multinational oil firms and inflows for offshore investors buying local debt.
GHANA: Ghana's cedi could extend its rally on weak corporate demand for the greenback, mainly muted by improved inflows from offshore investors buying government bonds, traders said. The cedi has so far recovered 3.4 percent with potential for further gains after the central bank adopted liquidity mopping measures and sold a series of medium-term government bonds to shore up the currency. Stanbic Bank Ghana trader Chris Nettey saw scope for further cedi strengthening. "Going forward, we expect to see consolidation of the cedi with a possible gain," Nettey said adding that the cedi was likely to trade within 1.8850-1.900 band next week.
ZAMBIA: The Zambian kwacha is next week expected to firm due to increased dollar supply and broad dollar losses on the international market following Germany parliament ratification of a permanent rescue package for the euro zone. At 1058 GMT on Thursday, commercial banks quoted the kwacha at 5,015 per dollar from 4,970 a week ago, but commercial bank traders said the local unit was likely to strengthen.
"The kwacha should gain because of dollar inflows as companies convert dollars to pay taxes. Positive developments in the euro zone are also expected to help the kwacha and other emerging market currencies," one commercial bank trader said. Zambia's currency jumped to 4,640 to the dollar in July, its highest since April 2011, as a new law limiting the use of dollars continued to drive up demand for the currency of Africa's biggest copper producer.
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