Nigeria's naira is likely to hit record lows at the interbank market next week amid a dollar shortage in Africa's biggest oil producer, while Kenya's government is set to announce more measures to prop up the battered shilling.
NIGERIA The naira fell to an all-time low of 159.10 to the dollar on Thursday and is expected to fall further next week as strong demand for the dollar persists against limited supply.
The currency closed at 158.45 to the dollar on the interbank market on Wednesday despite an attempt by the central bank to raise supply at its bi-weekly auction and allowed the naira to appreciate at the official window. The central bank sold $700 million at 154.60 to the dollar at its bi-weekly forex auction on Wednesday, its highest single sale this year, and against the $703.05 million demanded.
However, traders were sceptical about the regulator's intentions to defend the naira, which fell beyond a target band of 150 naira +/-3 percent at the previous auction.
KENYA Kenya's shilling is likely to firm against the dollar, supported by government measures to be announced next week to support the sickly currency, although some traders said caution would prevail until there were further details.
"It still creates uncertainty," said Kennedy Butiko, deputy head of treasury Bank of Africa. "But the initial market reaction is for people to sell the dollar because they perceive the committee will have to come up with guidelines that will favour the shilling."
The central bank has also said it will buy and sell hard currency directly with end-customers, a step seen likely to keep supporting the shilling. Central Bank of Kenya (CBK) Governor Njuguna Ndung'u has sought to assure markets the bank was committed to a floating exchange rate and stressed he was not contemplating capital controls.
"Players are positioning themselves for the central bank to cover the corporate (dollar) demand, and of course we have seen the news from the Prime Minister's office," one trader at a commercial bank said. The central bank also said it would hold its next Monetary Policy Committee meeting on October 5, just three weeks after a special meeting where it raised its benchmark lending rate by 75 basis points to 7.00 percent. The bank is seen raising rates but not by enough to save the shilling, analysts said.
UGANDA Uganda's shilling is seen trading in a narrow range against the dollar, shy of a record low of 2,901 hit on September 23, as investors look ahead to an October 4 central bank rate-setting meeting.
Inflation numbers due on September 30, with analysts expecting a rise in the year-on-year rate above August's 21.4 percent, putting pressure on the central bank to hike its key lending rate, known as the CBR. "The shilling will oscillate in a narrow range but the CBR is likely to inject it with some buoyancy," said Ahmed Kalule, a trader at Bank of Africa Uganda. "So we'll probably swing in a narrow range of between 2,830-2,860 over the next one week," Bukenya said.
TANZANIA Tanzania's shilling is expected to track back towards Monday's record low of 1,682/87, despite support from the central bank, as importers maintain their strong demand for dollars. Commercial banks quoted the local currency at 1,657/1,662 to the dollar compared with 1,638/1,643 at last Thursday's close.
"Monday was very scary," said Michael Milinga, senior trader at African Banking Corporation Tanzania. "There is persistent demand for dollars in the market, especially from oil and manufacturing sectors. Traders said they expected the shilling to trade in the 1,660-1,670 range in the coming days.
GHANA The cedi, which hit record lows this week, could start gaining against the dollar in the lead up to an October 13 bond auction open to foreigners, although the recent weakness may have shaken external faith in cedi-denominated debt. The unit was likely to find strong support at 1.595, traders said, although the level of external demand for the bond would determine its overall direction. "It is difficult to tell whether the cedi will appreciate," said Jacob Brobbey of Barclays Bank.