Mixed end-month outlook for key African currencies

Ugandan, Zambian and Tanzanian currencies are expected to strengthen against the dollar this week, with Nigeria’s and Kenya’s seen easing.

NIGERIA

The naira is likely to ease this week week as foreign flows into treasury bills slow and banks scramble for dollars to settle maturing futures in the local currency, traders said.

The naira was quoted at 360.50 per dollar on the over-the-counter market, a level where it traded last week. However, traders said most banks were bidding for dollars.

The currency exchanged at 360.00 at retail bureaus and 306.90 on the official market, supported by the central bank.

Traders said millions of dollars’ worth of naira futures have matured, adding to dollar demand pressure, while foreign investors are on the sidelines after rates fell slightly following the central bank’s Tuesday treasury auction. 

“The current illiquidity started two days ago and is worsening. If the tightness continues into this week (the) rate might get to 361,” said one trader.

KENYA

The shilling will be under pressure next week because of dollar demand from some energy and manufacturing companies buying dollars to meet end-month obligations, traders said.

Commercial banks quoted the shilling at 101.45/65 per dollar, compared with 101.35/55 at last Thursday’s close.  “We could see a bit of last minute demand from players who had not covered their end-month obligations,” said a senior trader from a commercial bank.

UGANDA

The Ugandan shilling is expected to strengthen as some non-governmental organisations convert hard currency holdings to pay salaries and other month-end expenses.

Ccommercial banks quoted the shilling at 3,730/3,740, unchanged from last Thursday’s close. A trader from a leading commercial bank said the market typically receives significant inflows from such activity.  “I think we are likely to see an overall bias on the stronger side for the local unit,” he said.

ZAMBIA

The kwacha may pare some of its recent losses next week as market players sell dollars for profit at current levels.

On Thursday, banks quoted the currency of Africa’s second-largest copper producer at 12.5000 per dollar from a close of 12.2300 on Wednesday last week.

TANZANIA

The Tanzanian shilling is seen strengthening slightly against the US dollar in the coming days, helped by a slowdown in demand for hard currency and improved inflows from the mining and tourism sectors.

On Thursday, banks quoted the unit at 2,300 per US dollar, down from a close of 2,298 a week ago