Receding concerns about political risk in Kenya are likely to continue to lift the shilling in the coming week, but lingering worries over national security in neighbouring Uganda will weigh on that country’s currency.
UGANDA
At 0925 GMT on Thursday commercial banks quoted the shilling at 2,655/2,665 to the dollar, weaker than last Thursday’s close off 2,620/2,630. The Ugandan currency earlier eased to 2,667, close to its February 2013 low of 2,670, according to Thomson Reuters data.
Telecoms and energy companies have bought the greenback heavily this week, forcing the central bank to sell dollars twice to try and slow the shilling’s decline.
“Companies seem to still have a bit of appetite for hard currency, so I think the shilling is likely to continue to be under pressure,” said Benon Okwenje, a trader at Stanbic Bank.
Rising concerns over national security would also keep the shilling on the back foot, said Stephen Kaboyo, managing director at Alpha Capital Partners.
Gunmen last weekend attacked police stations and a barracks in the Rwenzori region in western Uganda near the country’s oilfields, killing 17 people and underscoring insecurity in an area still recovering from a previous Islamist insurgency.
The shilling’s 14-day and 50-day weighted moving averages also point to a weakening trend for the currency in the near term.
KENYA
Commercial banks quoted Kenya’s shilling at 87.65/75 to the dollar on Thursday, up from 87.85/95 a week ago, with further gains seen next week.
“Politically, I think the environment has cooled off,” said Andlip Nazir, a senior trader at I&M Bank, predicting the shilling would hit a high of 87.20 next week.
The currency had weakened ahead of an opposition rally on Monday against growing insecurity, corruption and rising food prices, but it recovered after the event passed more peacefully than many had expected.
ZAMBIA
Traders expected a treasury bill auction next Thursday to attract foreign investors, boosting dollar supply, while demand for the kwacha would increase from companies that must make provisional tax payments by July 14.
At 1042 GMT commercial banks quoted the kwacha at 6.0600 per dollar, up from 6.2000 a week ago.
“With offshore players looking for attractive yields in local government securities, the local unit is expected to strengthen,” the Zambian unit of South Africa’s FNB bank said in a note.
TANZANIA
The Tanzanian shilling is likely to receive a boost from dollar inflows from the agriculture sector.
Commercial banks in east Africa’s second-largest economy quoted the shilling at 1,662/1,672 on Thursday, little changed from 1,662/1,670 a week ago.
“We expect the shilling to appreciate next week due to a slowdown in demand for U.S. dollars caused by the tight liquidity in the local currency at the moment,” said Fred Siwali, a dealer at CRDB Bank.
“The shilling is also being boosted by (dollar) inflows from coffee and cotton export proceeds.”
NIGERIA
Dealers expected the naira to be range-bound next week after the state Nigerian National Petroleum Corporation sold close to $200 million to some banks.
The naira closed at 162.40 to the dollar, little changed from 162.45 the previous day.
“We don’t see the naira losing much value in the coming days because of possible further dollar flows from offshore investors participating at the bond auction next week,” one dealer said.
The Nigerian currency has treaded in a range of 162-163 range over the last two weeks.
