WEEKAHEAD-AFRICA-FX: Most African currencies seen on back foot

A man trades U.S. dollars for Ghanaian cedis at a currency exchange office in Accra, Ghana, June 15, 2015. REUTERS/Francis Kokoroko

LAGOS, May 24  – The currencies of Nigeria, Kenya, Uganda and Zambia are expected to come under pressure against the dollar next week while those of Ghana and Tanzania are expected to be steady.


The Nigerian naira is seen under pressure as portfolio investors continue to exit local treasuries due to lower yields, traders said.

Trades were thin by midday on Thursday as most wanted to buy the dollar, with little supply. The naira last traded at 362.50 for investors on Wednesday.

Yields on Nigeria’s treasuries have fallen to around 12 percent from as high as 18 percent a year ago after the government repaid maturing bills rather than roll them over as it has done in the past. The outflow by investors has also been worsened by interest rate rises in the United States.

“A rise in FX rate might compensate for the drop in yields and that could attract investors back again,” one trader said of the naira, which was quoted at 305.90 on the official market, supported by the central bank’s regular interventions.

The Kenyan shilling could come under pressure in the coming week due to increased dollar demand from multinational firms paying dividends to their offshore shareholders and end-month demand from importers, traders said.

Commercial banks quoted the shilling at 101.00/20 per dollar, compared with 100.40/60 at last Thursday’s close.

“There is a lot of money being repatriated back … and end-of-month demand has also kicked in,” said a trader from a commercial bank.

The Ugandan shilling is forecast to weaken in the coming days on the back of ballooning demand from fuel importers looking to build comfortable hard currency positions amid surging crude oil prices.

At 0935 GMT commercial banks quoted the shilling at 3,735/3,745, weaker than last Thursday’s close of 3,710/3,720.

A trader at a leading commercial bank said market players expected strong demand from energy importers.

“They’ve been driving the market over the last few days and we anticipate more demand pressure from them as crude prices climb up,” he said.

The kwacha is expected to remain on the back foot versus the dollar in the coming week due to increasing demand for hard currency.

At 0850 GMT on Thursday, commercial banks quoted the currency of Africa’s No. 2 copper producer at 10.2500 per dollar from a close of 10.2000 a week ago.

“At these levels, many FX players would rather hold on to their long positions, expecting the rate to go higher,” the local branch of South Africa’s First National Bank (FNB) said in a note.

Ghana’s cedi could stabilise next week on expected central bank dollar sales, analysts said.

The cedi had been fairly stable in the first quarter of this year but has been under growing pressure this month. It was at 4.64 to the greenback by mid-morning on Thursday, compared to 4.59 a week ago.

“We project that the central bank will provide some funds to improve supply of dollars on the market to stabilise, or at least, slow the pace of depreciation of the local currency,” said currency trader Raphael Adubila.

The Tanzanian shilling is seen steady against the dollar with a bias toward strengthening in the coming days, buoyed by subdued demand for the U.S. currency from importers.

Commercial banks quoted the shilling at 2,282/2,287 to the dollar on Thursday, unchanged from a week ago.

“Demand and supply of U.S. dollars are more or less balanced in the market. Therefore, we see the shilling trading at the same levels next week or strengthening slightly,” said a trader at CRDB Bank. (Reporting by Chijioke Ohuocha, John Ndiso, Elias Biryabarema, Chris Mfula, Kwasi Kpodo and Fumbuka Ng’wanakilala; Compiled by Chris Mfula; Editing by Andrew Roche)

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