East African currencies outlook

Kenya, Uganda and Tanzania's shillings all look likely to weaken next week, possibly to life-time lows against the dollar, amid soaring inflation and strong demand for hard currency from fuel importers.
KENYA Kenya's shilling, which hit a record low of 95.10 against the dollar on August 9, looks likely to weaken in coming days after the central bank changed its discount window rate rules, easing money market liquidity. The shilling traded at 94.00/20 against the dollar on Thursday, weaker than a close of 92.30/50 a week ago.
"We are seeing consistent corporate (dollar) demand and the inflows that are coming are not big enough to match that," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. Traders said the shilling, which has hit a series of all-time lows this year, could trade in the 93.00-95.00 range against the dollar next week.
UGANDA The Ugandan shilling is seen flirting with its record low of 2,825 against the dollar as rocketing inflation and the prospect of more anti-government protests unsettle investors, traders said. Commercial banks in Kampala quoted the unit at 2,815/2,825, in line with last week's close.
"The general gloomy conditions of relentless surge in inflation, political uncertainty and dimming growth prospects are increasing investor appetite for the dollar," said Denis Mashanyu, a trader with Standard Chartered Bank Uganda. Annual inflation jumped to 21.4 percent in August from a revised 18.8 percent in July, mainly driven by sky-high food prices and a weak local currency that pushes up the cost of imported goods. "Market sentiment is for a bullish dollar in both the short term and medium term as demand for the greenback is anticipated to remain sturdy while inflows are not showing any signs of growing," Barclays said in a note.
TANZANIA The Tanzanian shilling is likely to fall, possibly to another all-time low, undermined by increased appetite for the dollar from oil importers and corporate clients. Commercial banks quoted the unit at 1,620/1,625 on Tuesday, barely moved from 1,622/1,625 a week ago. It slumped to a record low of 1,627 to the dollar on August 18 and has so far lost nearly 10 percent in value this year. Traders said they expected the shilling to trade in the 1,620-1,630 range in the coming days.
NIGERIA The naira is seen strengthening against the dollar next week as energy companies sell dollars to lenders as part of their normal month-end sales. It was trading at 154.71 to the dollar on the interbank market, firmer than Monday's close of 155, owing to inflows of $104.6 million from three energy firms.
"We are in the season of dollar sales by energy companies and we are expecting that more of them will sell the greenback in the coming days, which should help provide support for the naira," one dealer said. Traders said the naira should trade around 153.50-153.90 next week, with expected dollar sales from state-owned energy company NNPC and other firms that are yet to offload.
GHANA The cedi is expected to ease against the dollar due to importers buying foreign exchange to settle overseas bills, traders said. "Next week I think the cedi could trade above the 1.53 level. This is because corporate demand for dollars could pick up slightly next week as companies may be resettling bills," Brobbey said. Christopher Nettey of Standard Bank also expected the cedi to trade above the 1.53 level, but with support at 1.5320.
ZAMBIA Zambia's kwacha is expected to remain flat as investors remain nervous about taking positions until the outcome of September 20 elections becomes clearer. Commercial banks quoted the currency of Africa's top copper producer at 4,947 against dollar, a shade firmer than 4,951 a week ago.
"The situation is expected to remain the same until after the elections, whose outcome will determine which way the currency goes," one trader said. The currency has traded in the 4,600-4,800 band for most of the last 12 months, although the looming elections have caused it to weaken outside that band in the last month.