Tight monetary policy in Kenya, Tanzania and Uganda is expected to lead to further gains in currencies of those countries while the Nigerian naira could remain on the back foot on retailers' demand for dollar ahead of the Christmas season.
KENYA The Kenyan shilling is seen firming in coming days as the central bank maintains its tightening stance at the rates setting meeting for December. Interest rates have soared since October on the back of the aggressive tightening stance with the interbank rate at 29.6709 percent on Wednesday. Central bank raised its benchmark lending rate by a total of 950 basis points since October to 16.5 percent to fight inflation and foreign exchange volatility. The banks quoted the shilling at 89.80/90 against the dollar, a bit firmer than last Thursday's close of 90.15/25.
TANZANIA The Tanzanian shilling is seen extending recent gains against the dollar boosted by the central bank's monetary policy tightening and lower demand for greenback as business activity winds down towards year-end. Commercial banks in Dar es Salaam quoted the shilling at 1,675/1,685 against the dollar, stronger than last Thursday's close of 1,705/1,710.
UGANDA The Ugandan shilling is expected to gain against the dollar next week due to expectations of further monetary policy tightening by the east African country's central bank. Commercial banks quoted the local currency at 2,545/2,555 against the dollar, stronger than last Thursday's close of 2,590/2,600. The Bank of Uganda is expected to raise its benchmark Central Bank Rate as inflation remains way above the central bank's target.
GHANA The Ghana cedi should extend its gains next week that have been prompted by central bank support and mining sector's dollar sales. After a month of losses the cedi has posted significant gains in the past two sessions. "The Ghana cedi jumped 0.96 percent versus the US dollar to close Wednesday's session at 1.6450/75 on the back of central bank support and foreign exchange sales by some mining names, bringing the over 1-month of consecutive fall of the cedi to an end," said Jacob Brobbey of Barclays Bank.
NIGERIA The Nigerian naira could depreciate further against the US dollar next week with steady demand for the greenback from retailers stocking for Christmas putting pressure on the local currency.
Central bank intervention to sell dollar will likely keep the currency in the 161.40-162 range. The naira weakened to 161.60 to the dollar on the interbank market by Thursday compared to 161.20 to the dollar close on Wednesday. On the official window on Wednesday, the central bank sold all the $200 million demanded at 156.31 to the dollar, compared to $200 million at 157.26 to the dollar at the previous auction on Monday.
ZAMBIA The kwacha is next week likely to trade sideways against the dollar with the market looking to the outcome of the euro zone leaders' meeting aimed at resolving the debt crisis for direction. The currency of Africa's leading copper producer on Thursday firmed slightly to 5,085 from 5,100 a week ago.