JOHANNESBURG, Dec 5 (Reuters) - Pressure on Kenya's shilling
and Ghana's cedi is unlikely to ease in the coming week partly
due to strong end-of-year demand for hard currency. In Nigeria,
foreign demand for local debt could strengthen the naira.
Kenya's shilling is expected to be under pressure
next week as firms rush to fill their dollar orders ahead of the
holidays and given plentiful liquidity in the money markets.
At 1030 GMT, commercial banks posted the shilling at
86.50/60 per dollar, up from last Thursday's close of 87.00/10.
'The outlook is still grim. It is a pretty short month so we
could see some frontloading of demand starting next week and the
money markets are still liquid,' said Chris Muiga, a trader at
'Those two factors could be bearish for the shilling.'
The weighted average interest rate on the interbank
borrowing market fell to 7.5234 percent on Wednesday from 7.9980
percent the previous day.
Plentiful liquidity in the money markets usually makes it
slightly cheaper for banks to fund long dollar positions,
putting pressure on the shilling.
Strong end-of-year demand for foreign exchange continues to
weigh on Ghana's cedi and the trend will likely continue
The currency was trading within a band of 2.2950-2.3250
against the dollar at 1200 GMT on Thursday.
'Next week we will see strong end-of-year demand for foreign
exchange and that means that on balance you are going to see
some depreciation pressures on the cedi,' said Sampson Akligoh,
head of research at Accra-based Databank.
'I do not think that the current range is going to be broken
but we are going to see strong end-of-year corporate demand,' he
Uganda's shilling is forecast to be range bound with
the possibility of marginal gains over the next week, helped by
a fall in corporate demand as the tempo of business activity
slows ahead of the holidays.
At 1008 GMT commercial banks quoted the currency of east
Africa's third largest economy at 2,522/2,527, little changed
from last Thursday's close of 2,525/2,530.
'Business activity is declining as holidays come closer so
we don't expect a lot of (dollar) demand,' said Manohar Miryala,
head of treasury at Crane Bank.
'The shilling will be range bound ... beyond the holidays we
expect the policy easing move to start stimulating a recovery in
demand which could give the shilling pressure.'
The Bank of Uganda (BoU) this week surprised money markets
by cutting its policy rate for this month to 11.5 percent from
November's 12 percent.
The shilling is seen trading between a resistance level of
2,550 and a support level of 2,520 for the rest of 2013.
Tanzania's shilling is expected to hold steady
against the dollar in the days ahead and could strengthen
slightly, helped by a slowdown in demand for the U.S. currency
and year-end inflows from corporate clients.
Traders in Tanzania's commercial capital Dar es Salaam
quoted the shilling at 1,607/1,612 to the dollar on Thursday,
stronger than 1,610/1,617 a week ago.
'The outlook for next week is that the shilling could trade
at the same levels or improve slightly, as some corporate
clients are offloading dollars towards the end of the year to
make payments in local currency,' said Joseph Maji, a dealer at
Traders said they expect the shilling to trade in the
1,600-1,610 range over the coming days.
The Bank of Tanzania said on its website it had traded $31
million on the interbank foreign exchange market over the past
Last minute offshore investor interest in local debt should
provide some support for the naira next week, with the currency
seen strengthening to around 158-158.20 against the dollar.
At 1157 GMT, the naira was trading at 158.50 to the dollar
on the interbank market, weaker than its 158.32 close a week
Nigeria plans to sell 3-year and 20-year bonds worth 75
billion naira ($473.63 million) next week, which is expected to
attract foreign demand.
'Interest from offshore investors in local debt will
continue to provide support for the naira for the rest of the
week and early next week,' one dealer said.
Traders said flows from energy companies, including the
state-owned NNPC, should increase dollar liquidity next week.
The kwacha is likely to remain on the back foot next
week due to increased demand for dollars driven by imports for
the festive period.
At 1042 GMT on Thursday commercial banks quoted the currency
of Africa's leading copper producer at 5.555 per dollar, little
changed from last week's 5.500.
'Demand for the dollar is higher than the supply due to
festive imports and this will most likely continue into next
week,' one trader said.
(Reporting by Duncan Miriri, Elias Biryabarema, Fumbuka
Ng'wanakilala, Matthew Mpoke Bigg, Oludare Mayowa and Chris
Mfula; Editing by Tosin Sulaiman and Jane Merriman)
Keywords: AFRICA CURRENCY/
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