Nigeria's naira is likely to remain under pressure in the final run-in to presidential elections, while Kenya's shilling should gain on the back of rising inflation and central bank policy tightening.
NIGERIA The naira is expected to hold steady next week at around 155 naira to the US dollar as persistent foreign exchange demand ahead of a president election outweighs expected month-end dollar sales by energy companies.
The naira was trading at 155.30 to the dollar early on Thursday, in line with Wednesday's close, as dollar liquidity from sales by oil companies and some lenders balanced out demand at the interbank market. The unit hit a record low of 157.55 on March 18.
The central bank sold $300 million at 151.52 a dollar at its bi-weekly foreign exchange auction on Wednesday, as well as $203 million in short-tenored foreign exchange forwards at the second auction of its kind.
KENYA Kenya's shilling is expected to strengthen further against the dollar as short-term rates creep up in tandem with rising inflation, which has forced the central bank to start tightening policy.
Commercial banks quoted the shilling at 83.15/25 against the dollar, up from last Thursday's close of 84.90/85.00. The unit hit a record low of 86.7 on March 15. Traders attributed the strength to a squeeze on shilling liquidity that has made it more expensive to fund short shilling positions. "The shilling has more room to strengthen with high inflation and interest rates ticking higher," said Samir Lagadia, head of trading at Diamond Trust Bank.
Year-on-year inflation jumped to 9.19 percent in March from 6.54 percent a month earlier, driven by food and fuel prices. The central bank raised its benchmark lending rate by 25 basis points to 6.0 percent on March 22 and has since moved to mop up shillings through sale and repurchase agreements. The weighted average overnight rate jumped by 43 basis to 1.9 percent on Wednesday and has risen 88 basis points since Friday.
UGANDA Uganda's shilling, which has hit a record low of 2,422 to the dollar on March 16 is expected to trade in a narrow range, supported by moderate demand for dollars. Banks in Kampala quoted the currency at 2,398/2,403 against the dollar, slightly stronger than a week ago.
TANZANIA The Tanzanian shilling is likely to come under pressure as multinationals buy dollars to pay dividends to overseas shareholders. Commercial banks quoted the unit at 1,500/1,505 to the dollar compared with 1,4901,500 a week ago. Traders said they expect it to trade in the 1,500-1,510 range.
"We expect the shilling to weaken after April because many corporate customers will be looking to buy dollars for dividend payments at the end of the first quarter," said Bruno Ngooh, a trader at Standard Chartered Bank Tanzania.
GHANA Ghana's cedi should extend healthy gains against the dollar due to foreign investor interest in local debt and equity and central bank willingness to sell dollars stance that has led to a 0.75 percent gain for the local currency his week. "We expect the currency to remain range-bound with the potential for some marginal appreciation," said Databank analyst Sampson Akligoh. The cedi was trading at 1.5130/55 versus the dollar and may hit 1.51 before the end of the week, Stanbic Bank's Christopher Nettey said.