Tighter monetary supply should boost Kenya's shilling against the dollar next week, while Uganda's unit may come under pressure due to foreign unease at political violence.
KENYA Tight money market liquidity is seen supporting Kenya's shilling against the dollar next week although any gains may be capped by typical month-end demand for the greenback or central bank intervention, traders said. The local commercial banks quoted the shilling at 83.25/35, slightly firmer than 83.90/84.00 a week ago.
The central bank has been reducing money supply to strengthen the shilling and tame consumer prices. A continuation of that policy will see the shilling continue to firm against the greenback, market players said. "The fact is that you are better off having shillings than holding dollars," said Solomon Alubala, head of trading at Co-operative Bank. The next resistance level is likely to be 83.00 level, he added.
Traders said the shilling's performance would also depend on how the central bank tackles the dilemma of supporting growth while also taking on rampant inflation and soaring overnight money market lending rates.
UGANDA The shilling is likely to fall against the dollar due to violence against opposition protesters, which could unnerve foreign investors and push the currency to a psychologically key low of 2,400. Commercial banks quoted the unit at 2,375/2,380, in line with last Thursday's close. "There are all these offshore fund managers who have taken positions on the Uganda shilling," said Mark Bitarabeho a trader at Standard Chartered Bank Uganda.
TANZANIA Tanzania's shilling is expected to weaken slightly against the dollar due to pent-up corporate month-end dollar demand. Commercial banks quoted the shilling at 1,509/1,514, barely moved from last Thursday's level. Despite the forecast weakness, traders said they expected the 1,515 support level to hold firm.
ZAMBIA The kwacha is likely to remain stable against the dollar in the coming week, with little to attract or deter foreign investors. "This will be a short first week of the month during which many companies will be doing their month-end reports and we expect the kwacha to trade in the range 4,700/4,750," one trader said.
The currency of Africa's biggest copper producer has traded between 4,800 and 4,600 for most of this year. During 2010, it met firm resistance at 4,600. On the few occasions it breached that level, it went on to test but failed to breach 4,550.
GHANA Following a heavily oversubscribed 3-year bond auction on Wednesday, corporate dollar demand may overtake supply and exert pressure on the cedi. The unit has traded flat in thin volume around 1.495 this week - its firmest since mid-February - after gaining 1.22 percent the previous week as foreign investors bought local currency ahead of the 320 million cedi bond auction. Foreigners are only allowed to buy bonds of 3-years or longer.