Last update: Wed, 10 Feb 2016 10pm

African currencies week ahead: African currencies expected to trade at familiar levels

Agricultural inflows and a slowdown in demand for dollars in Tanzania should keep the shilling in familiar ranges next week, while worry about the implications of Zambian President Michael Sata's death is expected to weigh on the kwacha.

TANZANIA: Commercial banks in Tanzania quoted the shilling at 1,705/1,715 to the dollar on Thursday, compared with 1,703/1,713 a week ago.

"We think the shilling might trade at the same levels next week, but if demand for greenbacks picks up then it could fall to 1,713/1,718 levels," said Moses Kawiche, a trader at CRDB Bank.

The Bank of Tanzania said on its website it had traded $31.15 million on the interbank foreign exchange market over the past week.

ZAMBIA: Zambia's kwacha is likely to be affected by investors' caution as Africa's second-largest copper producer buries President Michael Sata and looks to elections next year. At 1104 GMT on Thursday, commercial banks quoted the kwacha at 6.3250 per dollar from 6.3550 a week ago but traders said the local unit was inclined to weaken. "The market is still jittery and the direction of the kwacha will largely depend on how smooth the country transitions to a new leader," one commercial bank trader said.

Sata died last week in a London hospital where he had been receiving treatment for an undisclosed illness. Campaigns for elections in January next year are expected to begin after his burial next Tuesday.

KENYA: The Kenyan shilling is expected to continue its weaker tone in the week ahead as part of an emerging market slump after a drop in price of crude oil and a dollar rally this week. The shilling hovered close to three-year lows at 89.70/90 per dollar on Thursday, down from 89.20/30 last week. Traders say the central bank might decide not to intervene to prop up the currency, due to the global factors at play in the depreciation. The central bank has been acting on a daily basis since September 26 to mop up excess shilling liquidity, which tends to support the shilling by making it more costly to hold dollars.

UGANDA: The Ugandan shilling is expected to be range-bound in coming days, although demand by foreign-owned companies looking to build hard currency positions in preparation for year-end may could weigh on the local unit. At 1102 GMT, commercial banks quoted the shilling at 2,695/2,705, stronger than last Thursday's close of 2,702/2,712.

"In the coming days we're anticipating corporates with foreign ownership to exert demand," said Isaac Iga, chief dealer at Orient Bank. "These firms usually buy dollars around this time as they prepare to report their earnings for the year." The shilling was likely to oscillate between 2,685 and 2,715 over the next week, Iga said.

Copyright Reuters, 2014