LUSAKA, April 8 (Reuters) – Zambia’s currency is likely to continue weakening against the U.S. dollar next week while Uganda’s gains. Kenyan, Nigerian and Tanzanian currencies are expected to hold steady.
The kwacha may come under renewed pressure against the dollar next week due to increasing demand for hard currency as business activity heightens after the Easter holidays.
On Thursday, commercial banks quoted the currency of Africa’s second largest copper producer at 22.1100 per dollar, marginally down from 22.0750 at the close last Thursday.
“In the absence of central bank intervention, the kwacha will likely continue depreciating,” one commercial bank trader said.
Zambia’s central bank last week injected $12 million into the economy, thus slowing the kwacha’s depreciation, Zambia National Commercial Bank (ZANACO) said in a weekly note.
The Ugandan shilling is seen trading with a firming tone on the back of conversions by offshore investors exiting Ugandan assets and weak importer demand.
At 1005 GMT commercial banks quoted the shilling at 3,645/3,655, compared to last Thursday’s close of 3,660/3,670.
“We have seen consistent offshore investor selling in last few days and we anticipate the same in the short term,” said an independent FX trader, who explained that the offshore investors were exiting Ugandan assets like government securities.
Importer demand, he said, is also seen largely remaining lacklustre due to weak consumer spending.
The Kenyan shilling is expected to take a pause in the week ahead after gaining ground rapidly in the previous two weeks.
At 1030 GMT on Thursday, commercial banks posted the shilling at 107.90/108.10 per dollar, having leapt from 109.20/40 the previous week.
The surge in the currency has been driven by dollar inflows from investors abroad into the local government debt market, and positive sentiment following the approval of a new financing package by the International Monetary Fund.
“It will either stabilise or start losing ground. If I were a buyer I would pick (dollars) at these level because there is a limit to how much it can strengthen in a short period,” said a trader at a commercial bank.
The naira is seen unchanged next week as the central bank maintains its grip on the currency and dollar scarcity blights the spot and black markets, traders said.
Dollar shortages have plagued Nigeria as COVID-19 weakened oil prices. The central bank has maintained a currency regime that has created multiple quotes on the naira and deterred foreign investment.
The currency was quoted at 485 per dollar on the black market on Thursday, a level it has been stuck at since this month.
It traded within a range of 407 to 410 naira on the spot market but remained flat on the official market backed by the central bank at 381 naira since last July.
Tanzania’s shilling is expected to hold steady next week and may gain more in the short to medium term as the new president pushes to improve the business environment.
Commercial banks quoted the shilling at 2,314/2,324 on Thursday, the same levels as last week’s close.
“Demand will continue to be driven by manufacturing and energy importers while the inflows are expected to be from normal daily retail activities,” one commercial bank trader said. (Reporting by Chris Mfula, Elias Biryabarema, Duncan Miriri and Chijioke Ohuocha; Compiled by Chris Mfula; Editing by Alison Williams)
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