Cedi to rally this week

Expected inflows from a dollar loan and a $1billion Eurobond are to raise the cedi’s value against the major currencies

Expected inflows from a dollar loan and a $1billion Eurobond are to raise the cedi’s value against the major currencies

The cedi is expected to rally this week due to expected inflows from an annual dollar loan to fund cocoa purchases.

According to a Reuters report, the cedi is expected to

rally towards 3.5 against the dollar in this week due to expected inflows from a dollar loan taken out each year by the government to fund cocoa purchases and a $1 billion Eurobond, traders said.

The cedi, which rebounded strongly in July after slumping nearly 30 per cent in the first half of the year, was trading at 3.8392 before the week ended.

The government launched a Eurobond at 10.75 per cent coupon rate last Wednesday. It also signed a $1.8 billion loan deal in Paris in September for 2015/16 crop purchases.

Both these factors should support the currency in the months ahead.

“Now that the Eurobond money is raised, we would expect the cedi to record very significant gains on the market, even before the dollars come to the market, as a result of short selling,” said Joseph Biggles Amponsah, of Dortis Research in Accra.

“The gains will be largely fuelled by the portion of the proceeds that will be exchanged for domestic settlements,” he said.

Nigeria

The naira is seen slightly down in the parallel market and stable at official forex exchange market this week as the central bank continue to maintain its tight control to conserve reserves, while imports stock for forthcoming Christmas sales.

The currency was trading at 197.5 to the dollar on the official interbank market last Thursday, weaker than 196.5 a dollar the previous Thursday after the central bank adjusted its peg rate last week. But the naira weakened at the parallel market to 225 to the dollar from 222 a dollar a couple of weeks ago on strong demand from some importers.

“We expect to see further depreciation of the naira in the coming weeks as more importers stock ahead of the Christmas sales,” one trader said. The local currency remains pegged at 197 to the dollar at the official market, while central bank said the naira is appropriately priced at that level.

Kenya

The shilling is expected to trade in a tight band this week with a bias for strengthening on the back of lower demand for dollars and tight liquidity.

The shilling was trading at 103.05/25 per dollar last Thursday, up from 104.40/50 at the previous Thursday’s close.

The shilling rose to a high of 102.90 earlier last week and traders said it would push to breach that level.

“In the coming days it should try and break that driven by tight liquidity and subdued demand,” said a trader at a commercial bank, adding importers were waiting to see how far the shilling will strengthen.

Zambia

The kwacha may depreciate this week due to challenges including electricity shortages and tumbling copper prices, which have put pressure on Africa’s number two producer of the metal.

At 12.01 p.m. last Thursday commercial banks quoted the kwacha 11.8900 per dollar from 11.8800 a week before.

“We are of the view that due to fundamental weaknesses in the economy, the Kwacha could weaken in the medium term,” Zambia National Commercial bank said in a note to Reuters.

Uganda

The Ugandan shilling is forecast to trade range bound over this week, as players await a policy rate decision that is expected to give the currency a clear direction.

At 11.33 p.m. last Thursday commercial banks quoted the shilling at 3,675/3,685, stronger than previous Thursday’s close of 3,685/3,695.

“All focus in the market will be on the rate decision, until then activity on both sides will likely be muted,” said Ahmed Kalule, trader at Bank of Africa.

He said the shilling will probably oscillate between 3,665-3,695 ahead of Bank of Uganda (BoU) policy rate decision due on October 15.

Tanzania

The Tanzanian shilling is expected to remain stable or strengthen slightly against the U.S. dollar in the days ahead, buoyed by a slowdown in demand for greenbacks ahead of a general election later this month.

Commercial banks quoted the shilling at 2,165/2,175 to the dollar last Thursday, unchanged from a week before.

“The shilling is expected to hold steady or appreciate slightly against the dollar because of a slowdown in business activity as the October 25 presidential and parliamentary elections approach. Liquidity tightness in the shilling is also supporting the local currency,” said Theopistar Mnale, a dealer at TIB Development Bank.

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