The Ugandan shilling could remain under pressure after the finance minister announced a 71 percent increase in spending for the 2015/16 fiscal budget, while Kenya's currency may struggle owing to a widening deficit.
UGANDA: The shilling will be bearish after Finance Minister Matia Kasaija said in a budget speech Uganda would spend 24 trillion shillings ($8 billion) during the next fiscal year from 14 trillion shillings in 2014/15.
The local currency closed at 3,155/3,165 to the dollar, weaker than 3,075/3,085 a week ago. So far this year the local currency is 12.3 percent weaker against the greenback.
"We have been going through a panicked buying mode and definitely this spending jump will not help matters," said David Bagambe, trader at Diamond Trust Bank, adding that the central bank may help prevent a drastic weakening of the shilling.
KENYA: Despite strengthening slightly this week, the shilling is seen losing ground with traders citing a widening deficit that could affect sentiment against the currency. Kenya projected the deficit at 570.2 billion shillings equivalent to 8.7 percent of GDP in the 2015/16 fiscal year.
At close of trade, commercial banks quoted the shilling at 97.05/15 to the dollar versus 96.00/10 a week ago. "We still maintain the shilling should be weakening further," said a trader at one major commercial bank in Kenya. "The gap between revenue and expenditure will become bigger and we need to see how they will recover that."
TANZANIA: Tanzania's shilling is expected to weaken against the dollar, undermined by strong demand for the US currency from energy and manufacturing sectors amid low hard currency inflows. Commercial banks quoted the shilling at 2,185/2,195 to the dollar, weaker than 2,150/2,160 a week ago.
"The shilling will likely surpass 2,200 levels next week as demand continues to grow," said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania.
NIGERIA: Nigeria's central bank adjusted its exchange rate peg on Thursday to 196.90 naira against the dollar from the 196.95 it set last week but dealers said the move was not a currency appreciation as it wasn't market driven. The local currency traded around 199.4 to the dollar on the interbank market, weaker than 198.95 last week.
Traders were hopeful that Africa's biggest economy would restore liquidity to currency markets after it imposed restrictions on the forex markets in February. "We are looking forward to a quick reversal of the tight control imposed on the forex market soon because of the concern raised by the J.P. Morgan on the liquidity level in the market," one dealer said.
GHANA: The cedi is expected to remain under pressure after touching new lows this week on increasing dollar demand amid dwindling inflows, traders said. The local currency traded at 4.2400-4.2700 on Thursday from 4.1000-4.1650 a week ago, and down 22 percent against the dollar since January. "Interest rate savings and other financial instruments in the country are not rewarding enough to make businesses hold on to their cedis until they need the dollar," currency analyst Joseph Biggle Amponsah said, adding that the situation was driving firms to seek more dollars than needed as buffer.
ZAMBIA: The kwacha is expected to trade on the back foot in the coming week due to reduced foreign interest in government securities and rising importer demand for the greenback.
Commercial banks quoted the currency of Africa's No 2 copper producer at 7.2800, weaker than 7.2000 a week ago. "We have seen the kwacha trade on the backfoot despite the Treasury bill auction today. This gives us reason to believe that off shore interest in the local securities has subdued," one commercial bank trader said.
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