Rising importer demand is likely to weigh on East African currencies against the dollar next week, but tight monetary policy in Zambia is expected to prop up the kwacha. In West Africa, dollar proceeds from the state energy company should prop up Nigeria's naira, and neighbouring Ghana's cedi should rally on anticipation of an IMF bailout.
After a brief liquidity crunch, the average overnight interbank lending rate fell to 8.2033 percent on Wednesday from 13.8391 percent on August 25. Speculation in the market was that the Central Bank of Kenya would not allow the currency to weaken below 89 shillings/dollar, Njenga said. The central bank pumped an unspecified amount of dollars into the market last month after the shilling fell to 88.80/90, its weakest since December 2011.
But the currency, which has fallen 3.2 percent against the dollar so far this year, may get some support from next week's Treasury auction for 180 billion shillings worth of two- and 15-year bonds, Kalule added.