East African currencies are expected to come under pressure next week as investors flee emerging markets, while the naira is likely to hold its ground on anticipated dollar sales by the central bank.
"All markets are correcting and I don't think the shilling has been left behind," said one Nairobi-based trader. "It's all dependent on what's happening in the global markets next week." Kenya's central bank intervened in the market on Tuesday by selling dollars. Traders say expectations of further central bank action were providing some support against adverse global market conditions.
Importers will be buying hard currency, he added, to pay for raw material shipments to cover the next month. The shilling is already down 22.6 percent so far this year, and could heading towards the 3,600 region.
"We expect the naira to remain unchanged at this level (210-211 a dollar) for as along as the central bank continues to inject dollars into the market," said Harrison Owoh, a bureau de change operator. The central bank has sold dollars to bureau de change operators twice a week since the start August in a bid to increase greenback liquidity and support the local currency.
The naira was quoted at 211 to the dollar by many parallel operators in Lagos on Thursday, slightly weaker than 210 last week, while the currency is trading at 199.50 to the dollar on the interbank market, but was seen reaching the 197 peg set by the central bank in February later in the day.
GHS traded at 4.1100 at 1120 GMT on Thursday, compared to 4.1800 last Thursday. "We are beginning to see some stability due to (dollar) sell-off by investors and their banks in order to take advantage of the current attractive exchange rate before the central bank comes in," Joseph Biggles Amponsah, analyst at Dortis Research, said.