Uganda's shilling may come under pressure next week as an increase in withholding tax rates for foreign bond investors undermines the commercial logic of holding the currency.
UGANDA: The Ugandan shilling is forecast to retreat against the dollar next week, undermined by a tax hike on income from government securities in the 2012/13 fiscal year, a move that unnerved offshore investors.
In her budget on Thursday, Finance Minister Maria Kiwanuka said the government would raise withholding tax on income from investments in Treasury bonds and bills from 15 to 20 percent. Commercial banks in Kampala quoted the currency of east Africa's third largest economy at 2,495/2,505, weaker than last Friday's 2,480/2,490.
KENYA: The Kenyan shilling is seen gaining against the dollar, helped by tightening liquidity as the central bank mops up the local currency using longer tenure repurchase agreements (repos). The Central Bank of Kenya, which maintained its tight monetary stance for the sixth straight month on June 5, has been mopping up liquidity using repos, which traders said was making it hard to hold long dollar positions. "This time they are ahead of the curve and they are ready to support the shilling with the repos," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. On Friday, commercial banks quoted the shilling at 84.70/90 per dollar, weaker than last Thursday's close of 84.60/80.
TANZANIA: Tanzania's shilling is seen extending its rally against the dollar in the days ahead, helped by tight local liquidity and inflows of greenbacks from agriculture and tourism. Commercial banks in Dar es Salaam quoted the shilling at 1,578/1,588 on Thursday, stronger than 1,584/1,594 a week ago. "It's a quiet month. We haven't seen any significant customer activity. The outlook for next week is that we hope the shilling will continue to gain strength," said Patrick Kapella, chief dealer at First National Bank Tanzania.
NIGERIA: The naira is forecast to ease against the dollar due to a persistent interbank shortage of foreign exchange. The naira was trading at 163.20 to the dollar at the interbank market at 1045 GMT, broadly in line with its trading range this week. "The market is short on dollars and just hovering around the 163 level because of expectations that the central bank could intervene to provide dollar liquidity," one dealer said. The naira has fallen relentlessly in recent weeks, despite central bank attempts prop it up, driven initially by dollar demand from fuel importers but later by an exodus of foreign investors out of local bonds.
GHANA: The cedi, which has slumped to a series of record lows against the dollar this year, is expected to trade relatively stable as rising market interest rates stem demand for the greenback, traders said. The cedi was $1.925/30 on Friday - another record low - and another trader said dollar demand from importers and local companies could trigger further weakness.