The Ghana cedi is expected to hold firm on expectations of new foreign exchange inflows this week, while Nigeria’s naira is expected to come under pressure on the parallel market.
The outlook for east African currencies is mixed.
The cedi is expected to be steady and could see a rally on expected hard currency inflows from cocoa and Eurobond loans this month.
The local unit, which rebounded strongly in July after slumping nearly 30 per cent in the first half of the year, has since shed most of the gains. It traded at 3.9500 at 1137 GMT last Thursday compared to 3.7000 a week before.
Industry regulator Cocobod is set to sign a $1.8 billion loan from international lenders tomorrow in Paris for the 2015/16 crop purchases, estimated to yield around 900,000 tonnes.
Ghana also plans to issue a fourth Eurobond of up to $1.5 billion in late September for debt restructuring and budget financing.
“We expect the local currency to be fairly stable with marginal movements around the 4.0 mark. However, expectations of dollar inflows into the market this month could reduce buy-and-hold trades in the dollar in the short term,” Joseph Biggles Amponsah, analyst at the Accra-based Dortis Research said.
The naira is expected to face pressure on the parallel market after JP Morgan said it was removing Nigerian debt from its influential emerging markets bond index by the end of October, forcing fund managers to sell.
It traded at 223.5 to the dollar on the parallel market last Thursday, against 220 to the dollar the previous week.
It closed at 197 to the dollar on the interbank market, the same level it was pegged in February by the central bank in its bid to curb speculation and rapid depreciation.
“The parallel market exchange rate, which stabilised somewhat in recent weeks as the central bank provided dollar liquidity to some outlets, could well depreciate on increased forex demand stemming from heightened risk and investor concern,” NKC African Economics said in a research note.
The Ugandan shilling is expected to hold steady, underpinned by limited corporate demand for dollars as companies prepare to pay mid-month tax bills.
At 1006 GMT last Thursday, commercial banks quoted the shilling at 3,660/3,670, stronger than the previous Thursday’s close of 3,670/3,680.
“We will probably continue to see demand (for dollars) very limited,” said Faisal Bukenya, head of market making at Barclays Bank, noting the tax payment deadline.
The local currency, which is 24.4 per cent weaker against the dollar so far this year, would likely trade in the 3,655-3,690 range during this week, he said.
The Kenyan shilling is expected to come under pressure again after the impact of the central bank dollars sales this week to support the currency fades.
At 0925 GMT last Thursday, commercial banks quoted the shilling at 105.25/45, barely changed from the previous day’s close of 105.25/35.
“It has been stable in that region for the last two days. But we expect it to face some pressure from last Friday,” said one trader at a Nairobi-based commercial bank.
The currency had almost reached its all-time low set in October 2011 of 106.80 when the central bank intervened.
The Tanzanian shilling is expected to remain steady against the dollar this week and could appreciate slightly, buoyed by increased dollar sales by the central bank.
Commercial banks quoted the shilling at 2,160/2,170 to the dollar last Thursday, weaker than 2,145/2,155 the previous Thursday.
“There will likely be more stability on the shilling in the days ahead and it could appreciate slightly due to the intervention of the central bank,” said Mohamed Laseko, a dealer at CRDB Bank.
The Zambian kwacha is likely firm against the dollar, after central bank action to support the currency.
At 1126 GMT last Thursday, commercial banks quoted the currency of Africa’s No.2 copper producer at 9.9200 per dollar from a close of 9.8400 a week before.
“The local currency is expected to continue to rebound as intervention from the central bank seems to have triggered those sitting ‘long’ to start offloading their dollars,” South Africa’s First National Bank (FNB) said in a note.