The battered Nigerian naira is likely to trade within a tight range next week, sustained by dollar flows from oil companies and intervention by the central bank. Kenya's shilling is expected to come under renewed pressure, though central bank interventions and dwindling dollar demand before the holiday season will ease some of the pressure.
State-owned energy company NNPC sold about $200 million to some lenders on Wednesday, helping reduce the volatility in the market. "The central bank will want to keep the exchange rate at a relatively stable level towards the close of the financial year," another dealer said.
"We expect the shilling to actually test 91," said Joshua Anene, a trader at Commercial Bank of Africa. However, central bank draining of liquidity and even direct dollar sales to the market should ease the pressure on the shilling in coming days, said I&M trader Eric Gathecha said. He added that dollar demand should start easing off towards the middle of December as companies close for the year, which should also help the shilling.
He said the shilling would likely oscillate in the 2,750-2,770 range over the next few days. On Thursday the central Bank of Uganda removed a total of 112 billion shillings ($40.61 million) worth of excess liquidity via seven-day repo, the third this week.
"The local currency has also been getting some support from the agriculture sector, particularly cashew nut exports, while the central bank has also been selling dollars." Market participants expected the shilling to trade in the 1,720-1,730 range over the coming days. The Bank of Tanzania said on its website it had traded $37.25 million on the interbank foreign exchange market over the past week.