African currencies outlook

Strong demand for the dollar in Nigeria and Uganda is expected to weaken local currencies while Kenya's shilling looks set to strengthen due to a liquidity squeeze.
KENYA Kenya's shilling is seen firming against the dollar in the days ahead, aided by a liquidity crunch that has made it more expensive to fund long dollar positions.
The central bank tightened its rules for commercial bank borrowing through its window of last resort to punish those relying on funding from the window, sending the overnight discount rate to 17.89 percent from 6.25 percent in four days. Commercial banks posted the shilling at 92.70/90 against the dollar, stronger than last Thursday's close of 93.40/60.
TANZANIA Tanzania's shilling was expected to receive a cushion from the proceeds of cotton and coffee exports, preventing it from sliding further next week. Commercial banks quoted the local currency at 1,623/1,628 to the dollar, compared to 1,616/1,622 at last week's close.
"If inflows from export proceeds of cotton and coffee build up, the shilling might appreciate against the dollar in the coming days or maintain its current levels," said CRDB Bank trader, Frank Ndugulile.
UGANDA Uganda's shilling is expected to maintain a downward trend, weighed down by increased dollar demand from importers as the month draws to a close. Commercial banks in Kampala quoted the local currency at 2,780/2,800, weaker than last Thursday's close of 2,785/2,795. Demand for dollars normally tends to surge towards the end of the month as importers convert their shillings for greenbacks to pay for the next month's supplies and settle other hard currency commitments. He said the shilling would likely change hands in the 2,770-2,840 range into next week.
NIGERIA The naira is expected to depreciate against the US dollar next week as strong demand for the greenback outpaces supply at the bi-weekly auction. The local currency was trading at 153.72 to the dollar on the interbank market on Thursday, firmer than the 153.80 at Wednesday's close. Traders said the financial system experienced some inflows from offshore investors through domestic debt instruments, which provided support for the naira, but this was expected to be short-lived.
GHANA The cedi is expected to hold firm after rebounding last week and posting gains earlier this week, traders said. Kobla Nyaletey of Barclays Bank quoted the interbank cedi-dollar exchange rate at 1.5240/65 at 0945 GMT on Thursday, slightly down from Wednesday's close of 1.5230/55. Nyaletey said he expected the cedi to remain relatively stable throughout the week, while Biggles Amponsah of Access Bank said he expected the currency to post further gains.
ZAMBIA The kwacha is expected to remain stable next week after bouncing back from uncertainty a week ago as investors fled emerging and frontier market assets, but remains vulnerable to global copper market swings. "We expect the kwacha to remain stable in the range 4,900 - 4980," one trader said.