Weak copper prices were expected to weigh on Zambia's kwacha next week and corporate dollar demand was likely to put pressure on Ghana's cedi, but Kenya's shilling was expected to trade little changed.
At 1103 GMT on Thursday, commercial banks quoted the currency of Africa's second-largest copper producer at 11.0700 to the dollar, compared with a close of 11.0100 a week ago. "With copper prices not showing signs of significant recovery coupled with strong greenback demand, we should see the local currency remain on the back foot," Zambia National Commercial Bank analysts said in a note.
"The shilling could be range-bound as at these levels. (The central bank) has been quick to defend the currency," said one Nairobi-based trader, adding that a recent uptick in yields on 182-day and 364-day Treasury bill yields was also helping.
Traders said demand for dollars had shot up after that decision and they remained scarce. The naira weakened to 300 on the parallel market on Thursday from 270 last week. "We see the naira trading within a range of 300-320 next week if the dollar shortage persists on the parallel market," one currency trader said. The naira is trading on the official interbank market at 199.50 a dollar, unchanged from last week. It is expected to hold at that level on the official market this week.
"What we see now is more of pre-election sentiment that is driving the shilling weakness, which is creating a dent to already fragile market confidence," said Stephen Kaboyo of Alpha Capital Partners. Voting takes place on February 18.
"There is a lot of focus on the shilling right now for investment in Treasury bills, which has caused it to appreciate," said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania, adding it should hold these levels until the end of the month, after which it could make gains.