Nigeria's naira is expected to remain volatile next week hit by the slide in crude prices after touching a new record low on Thursday, while other currencies are also seen on the back foot due to rising dollar demand from local importers.
The naira hit a record low of 194.65 to the dollar on Thursday and closed at 192.70 from 188.90 a week ago. Month-end dollar sales by oil companies to meet their local obligations have not been sufficient in supporting the naira. "Demand for the dollar remains strong in the market and we need consistent large dollar flows to reduce pent up demand in the market," one dealer said. The local currency has stayed well below a trading band of 160 to 176 to the dollar, set after the central bank devalued the naira by 8 percent in November.
"The liquidity will have improved. We might see the shilling under pressure," said a trader with a commercial bank. The trader said overnight average interest rates could fall further after the government cut its weekly borrowing target in the local market by a third to 8 billion shillings ($87.62 million). Kenya has cut this financial year's local borrowing target by close to a quarter.
The local currency is now 3 percent weaker to the dollar so far this year. Bukenya said the shilling would trade in the 2,850-2,875 range next week.
Market participants expected the shilling to trade in the 1,840-1,850 range over the coming days. The Bank of Tanzania said it had traded $86 million on the interbank foreign exchange market in the past week.
"(Dollar) supply has waned significantly while demand remains firm," Barclays Bank Ghana analyst Michael Akpakli said. He forecast the cedi could decline further to 3.5000 next week. The central bank said last week it was ready to intervene "vigorously" this year to ensure a much more stability for the cedi, which slumped 31 percent in 2014.
"The low copper prices could present a challenge to the kwacha," one commercial bank trader said. The central bank was expected to intervene should the currency weaken below 6.6000 to the dollar, while support was seen at 6.5000, the trader said. Kwacha weakness may be limited by investor interest in a Treasury bill auction later on Thursday, and as mining companies and other investors convert hard currency to kwacha to pay Value Added Tax (VAT) due by mid-month, the trader said.