The Ugandan shilling is likely to depreciate next week as foreign investors pull back from the bond market amid falling yields. In Kenya, the local currency could slide after the acting finance minister expressed concerns about a strengthening shilling.
UGANDA: Uganda's shilling is forecast to weaken against the greenback in the week ahead as offshore investors shun the country's debt, limiting supplies of the US currency at a time of soaring demand from corporates paying last year's dividends.
Analysts said foreign investors are likely to exit the east African nation's debt market as yields fall on the back of the central bank's new cycle of policy loosening. The Bank of Uganda (BoU) on Thursday maintained its monetary easing cycle launched last month by shaving a further 100 basis points off its key rate for March from February's 22 percent. Commercial banks in Kampala quoted the shilling, which is up 3.8 percent this year, at 2,390/2,400, weaker than last Thursday's close of 2,333/2,343.
KENYA: Kenya's shilling is seen under pressure ahead of a rate-setting meeting next week after the acting finance minister said he prefers the currency to remain weaker than 82 to the dollar. The shilling, which is 2.2 percent firmer this year and off a record low of 107 hit on October 2011, was posted at 83.20/40 against the dollar by commercial banks weaker than the 82.60/80 it closed at last Thursday. "The statement by the finance minister that the government prefers a slightly weaker shilling has caused jitters in the market and may see it fall a bit," said a trader at one commercial bank.
A slowing inflation rate, down for the third straight month to 16.7 percent in February from 18.3 percent in January, might also put pressure on the shilling if it triggered a central bank rate cut, traders said.
NIGERIA: The Nigerian naira is seen reversing some of its gains against the dollar next week on a resurgence of demand from importers and declining dollar inflows from oil companies and foreign investors. The naira was trading at 157.80 to the dollar on the interbank market on Thursday, weaker than the 157.78 to the dollar at Wednesday's close. Traders said a local unit of Chevron sold about $75 million to some lenders, but its impact on the naira was minimal as demand for the dollar was gradually building up. They said more importers are showing a preference for the interbank market because of the convergence of rates with the official window and the short turn around time for transactions.