African currencies outlook: offshore inflows to help Ugandan shilling

Dollar inflows from offshore investors buying Ugandan debt are expected to support the shilling in the next week. Kenya and Tanzania's shillings are likely to hold steady. Uganda's shilling is expected to strengthen over the next week, likely breaching the 2,500 support level, on the back of strong dollar inflows from commodity exporters and offshore investors buying government securities.
Commercial banks in Kampala quoted the currency at 2,510/2,515, stronger than last Thursday's close of 2,547/2,552. On Wednesday, the Bank of Uganda (BoU) auctioned 140 billion shillings ($55.39 million) worth of Treasury bills. Kenya's shilling is expected to hold steady against the dollar in coming days as a short supply of the currency limits demand for dollars.
The shilling was posted at 84.80/85.00 per dollar, firmer than last Thursday's close of 85.10/30. "The money market is very short on shillings," said Wilson Mutai, a trader at Gulf African Bank. "Unless this liquidity improves the market is not going anywhere." Tanzania's shilling is expected to hold its ground against the dollar over the coming days, helped by hard currency inflows from aid agencies and the central bank tightening liquidity.
Traders in Tanzania's commercial capital Dar es Salaam quoted the shilling at 1,608/1,613 to the dollar on Thursday, from 1,605/1,615 a week ago. Market participants said they expect the shilling to trade in the 1,600-1,610 range over the coming days. The naira is expected to trade around 160 to the dollar next week and could strengthen if the major oil companies begin their month-end dollar sales early.
The naira was trading at 159.55 to the dollar on the interbank market, firmer than its 160.75 per dollar close last Thursday. Traders said dollar inflows from offshore investors ahead of a bond auction boosted the local unit on Thursday and could be sustained if oil companies start their month-end dollar sales early. Nigeria's Debt Management Office will sell 55 billion naira ($343 million) in 3- and 20-year bonds at a monthly auction this Friday. The sale was postponed from Wednesday as the market was closed for a public holiday. "The naira is seen trading around 160 to the dollar next week, but could trade around the 159.6 level if oil firms commence their month-end dollar sale early next week," one dealer said.