Ugandan shilling expected to remain firm, kwacha weak
ZAMBIA’S KWACHA is expected to remain under pressure next week on increased dollar demand while the Ugandan shilling should firm on the back of inflows and reduced local currency liquidity. Commercial banks quoted the currency of Africa’s No.2 copper producer at 9.6500 per dollar from 9.4500 a week ago.
“Current trends seem to indicate that the local unit is likely to have a biased movement towards the downside should the current mismatch in demand and supply remain unchanged,” local commercial bank Cavmont said in a note.
The naira is expected to trade around 360 to he greenback to investors next week after the central bank kept rates on hold to tighten liquidity, traders say. The naira has been trading around 360 this week, close to the black market rate of 365, with an average of $100 million inflows daily into the currency market.
“There seems to be improved confidence by internationals at the current level. They have come back into the bond market,” one trader said.
Nigeria doubled the amount it raised at a bond auction on Wednesday as local funds and foreign investors piled into longer-term debt to lock in higher returns. On the official market, the naira is quoted at 305.75, with the central bank selling $500,000 daily to lenders.
The currency is seen firming in the coming days on the back of weak demand, inflows from NGOS and a central bank mop-up of excess local currency liquidity. As at 1258 GMT commercial banks quoted the shilling at 3,600/3,610, unchanged from last week’s close. On Thursday the central bank removed a total of 962 billion shillings ($267.22 million) worth of excess local currency liquidity via a repurchase agreement and two deposit auctions.
The shilling is seen easing against the dollar in the coming week due to demand from manufacturers and oil importers to meet end month obligations with central bank intervention likely to stem any volatility, traders said. At 1048 GMT, banks quoted the shilling at 103.20/ 40 per dollar, same as last Thursday’s close.
“I see the shilling weakening at a measured pace punctuated by central bank intervention,” said a trader from a commercial bank.
The shilling is seen holding steady against the dollar in the days ahead. Commercial banks quoted the shilling at 2,240/2,250 to the dollar on Thursday, unmoved from a week ago.
“We expect the shilling to be range-bound next week, but it could weaken to 2,245/ 2,255 levels in the event of a spike in demand for dollars,” said a trader at Commercial Bank Africa Tanzania.
A vegetable vendor counts his takings in Kampala.