Kenya's shilling could strengthen against the dollar next week, helped by good news from its large tourism sector, but other sub-Saharan Africa currencies are likely to stay under pressure as global growth concerns dent investor appetite.
Commercial banks quoted the shilling at 89.10/89.20 to the dollar earlier on Thursday, marginally weaker than 89.00/89.10 last week. Traders also expected support for the shilling from the central bank, which regularly uses repo and term auction deposits to manage market liquidity.
"The money market is still overly liquid, and I think they should keep supporting the shilling," one trader said, predicting an 88.50 to 89.30 trading range for next week.
The stock market index fell 3.43 percent on Thursday, its biggest intraday decline in eight months, while bond yields climbed by about 25 basis points across the board. "The naira is likely to depreciate further in the days ahead, unless the central bank increases its intervention in the interbank market," one dealer said. The central bank has stayed out of the market this week after state-owned energy company NNPC, which accounts for the bulk of interbank dollar trade, sold around $350 million to some lenders.
"We might cross 1,700 levels if this continues," Mwakibete said, adding that the weakness could be offset by dollar flows from tourism and the central bank. The Bank of Tanzania said on its website it had traded $27.2 million on the interbank foreign exchange market over the past week.
The currency traded around 2,675/2,685, down slightly from 2,670/2,680 a week ago. "Importers are expected to continue exerting pressure in the short term," said Faisal Bukenya, head of market making at Barclays Bank. "Limited appetite in the interbank will also remain. The tone for the shilling will be bearish in the short-term."
Commercial banks quoted the currency of Africa's second-largest copper producer at 6.3400/dollar versus 6.3100 last week. Pressure would also mount on the kwacha after companies finished paying local taxes on October 14, opening a window for renewed dollar demand, traders said.