Dividend payouts to offshore shareholders are likely to keep pressure on Kenya’s shilling next week, while the naira should take direction from a monetary policy meeting that is partly aimed at finding ways to support the Nigerian currency.
KENYA
Kenya’s shilling may face increased pressure next week as companies seek dollars to pay dividends to foreign shareholders, although the central bank is likely to offer support by continuing to mop up excess shilling liquidity.
Demand for the U.S. currency has risen this month due to annual dividends. By 1220 GMT on Thursday, the shilling was quoted at 87.30/40 to the dollar, a modest weakening from last Thursday’s close of 87.10/20. Traders said it could find support at 87.50.
“If 87.50 does break, we might see 87.80 very quickly,” said Abhinav Mathur, a trader at I&M Bank.
Mathur said although there has been dollar demand from a range of companies, the shilling was being supported by central bank mopping-up operations.
NIGERIA
Nigeria’s naira is expected to take its cue from a central bank interest rate decision next week, amid recent support from offshore inflows into the local debt market.
The central bank’s Monetary Policy Committee (MPC) will meet on Monday and Tuesday, when it will deliberate on further methods to help tighten liquidity and support the currency.
The naira was trading at 162.70 to the dollar on Thursday, broadly flat from its 162.65 close the previous day.
“We see the naira declining toward the 163 level next week if there is no further dollar supply, but the decision at the MPC meeting could swing the market in any direction,” one dealer said.
The central bank kept interest rates on hold at its last meeting in March, but it hiked the cash reserves requirement on private sector deposits by 300 basis points to 15 percent to tighten liquidity in the naira.
UGANDA
The Ugandan shilling was likely to trade in a tight range with a risk of weakening because of offshore investors pulling out money due to a drop in government debt yields.
At 0921 GMT on Thursday commercial banks in Kampala quoted the currency at 2,530/2,540 to the dollar, weaker than last Thursday’s close of 2,515/2,525.
“Foreign investors are likely taking out their money. They are not very attracted to the downward trend of rates on our paper,” said Ahmed Kalule, trader at Bank of Africa.
At this week’s Treasury bill auction the yields on the 182-, and 364-day notes dropped, although the rate on the benchmark 91-day paper rose slightly.
But Kalule said the currency could still hold within a narrow range of 2,520-2,540 to the dollar.
The shilling has hovered around the 2,500-2,550 range since April, underpinned by the central bank’s frequent moves to draw out shillings from the market and also helped by inflows from offshore investors buying Ugandan debt.
TANZANIA
The Tanzanian shilling is expected to weaken against the dollar in the coming days as demand for dollars from oil firms weighs on the local currency.
Commercial banks quoted the shilling at 1,653/1,658 to the dollar on Thursday, weaker than 1,648/1,653 a week ago.
Traders said the shilling was likely to trade in a 1,655-1,665 range in the coming session.
“The depreciation of the shilling has been caused by increased demand for dollars in the market, especially from the oil sector, while the market has been receiving very little inflows,” said Hamis Mwakibete, head of trading at Commercial Bank of Africa Tanzania.
“If the shilling continues to fall like this it could even reach 1,700 levels next week.”
The central Bank of Tanzania said on its website that it traded $64.95 million on the interbank foreign exchange market over the past week.
Reuters
