African currencies outlook

Nigeria's naira is likely to test more record lows amid doubts about the central bank's commitment to a broad dollar-peg, while Kenya's shilling may be turning the corner on a dramatic collapse after a surprisingly aggressive interest rate hike.
NIGERIA The naira fell to a record low of 164.85 to the dollar on Thursday and is likely to continue to weaken, possibly to as low as 170, unless the central bank takes practical steps to arrest its decline, traders said.
The Central Bank of Nigeria (CBN) has been pumping dollars into the market at its bi-weekly auctions to support the naira, but without sustained success, and governor Lamido Sanusi said on Wednesday he would not prop up the naira at any cost. His comments - balanced by a statement stressing no change in the foreign exchange stability stance - raised the prospect of a devaluation only two years after a 25 percent cut in the dollar value of the naira.
The CBN has promised to keep the naira in a band of +/- 3 percent from 150 but the regulator has allowed it to breach the upper limit twice within a week at its currency auctions, suggesting its resolve is waning.
KENYA Kenya's shilling is expected to firm after the central bank shocked the market with a 400 basis point rise in its key lending rate this week to combat rampant inflation and stabilise the exchange rate. But some traders said gains could be limited if global investors continued to trim their exposure to emerging markets because of concerns about Europe's economic health.
Charts showed support for the dollar at 100 shillings with a possibility of the shilling re-testing lows above 104, maybe to 104.50, should it remain subdued at below 100. The shilling has lost 26 percent this year and is one of the worst performing currencies in the world.
TANZANIA Tanzania's shilling fell to a new all-time low this week, pressured by energy sector demand for greenbacks, and could break through the psychological 1,700 level if importers continue to suck up dollars. "If the ongoing demand for dollars continues, we could break the 1,700 barrier. And, once we break through this level, the shilling could plunge all the way to 1,720-1,730," said Hakim Sheikh, a trader at Commercial Bank of Africa, Tanzania.
"There were rumours that the central bank met with officials from the oil sector to try to pull the shilling back to the preferred 1,650-1,660 range, but the insatiable demand for dollars in the market has just been battering the shilling." Traders said they expected the shilling to trade in the 1,680-1,700 range in the coming days, after a record low of 1,685 to the dollar on Wednesday.
ZAMBIA The kwacha is likely to trade sideways as investors digest a flurry of political developments, including the sacking of the central bank governor, in the two weeks since long-time opposition leader Michael Sata was elected president. The kwacha could appreciate to around 4,800 against the dollar if Sata's moves are interpreted as anti-corruption, and not anti-investment, and if Europe's debt crisis does not take any new unexpected twists.
"If the government issues policy statements against economic liberalisation and if the debt crisis in Europe is not properly handled the kwacha could fall to around 5,000 to the dollar," one trader said. Zambia's currency has traded in a 4,600 to 4,840 band for much of the last 12 months, although in the run-up to the September 20 election it retreated towards 5,000 - a level that has tended to trigger central bank support.