Nigeria's naira was expected to hold steady next week, while the outlook for other African currencies was mixed.
On the parallel market, the naira was trading at 219 to the dollar, down from 211 a dollar last week, but was expected to stabilise next week, traders said. "The stringent order-based system and restrictions on two-way trade leave the local exchange unit unable to reflect global market turmoil and a sell-off in domestic equities," NKC Africa economics said in its notes on Thursday.
Nigeria pegs its exchange rate at 197 to the dollar and abolished twice-weekly auction of forex in February in the wake of falling oil prices, leading to a rapid depreciation of the local currency on the parallel market.
"Over the last couple of months on average, the shilling has lost about a shilling every week ... and the trend looks set to continue," said a trader at one Nairobi-based commercial bank. "There is a lot of liquidity in the market and also the dollar has been strengthening against major emerging market currencies," he added. Traders say expectations of further central bank intervention with dollar sales was providing some support.
"There is a slowdown in business activity partly due to the upcoming elections on October 25. The shilling will likely remain at same levels next week," said Theopistar Mnale, a dealer at TIB Development Bank.
"Liquidity is scarce on one hand and demand (for dollars) has also tailed off," said Faisal Bukenya, head of market making at Barclays Bank. "I see the shilling playing in the 3,650-3,675 range." Traders say importers are not seeking dollars as they consider the shilling underpriced at current levels. The shilling is 24.6 percent weaker against the greenback so far this year.
"There are worries about electricity problems as well as falling copper prices and the failure by the government to state how it intends to halt the slide has created panic," analyst Maambo Hamaundu said. Hamaundu said the kwacha was expected to register further losses next week unless the government came out with a strong message on policy measures to stabilise the currency.