NAIROBI, Sept 18 (Reuters) - The Kenyan shilling is expected to remain under pressure next week due to increased dollar demand and slowing inflows, despite central bank efforts to keep its slide in check.
During the week, the currency of East Africa’s biggest economy weakened to touch a near three-year low of 89.45/89.55 to the dollar, levels at which it last traded in mid-December 2011, according to Reuters data.
The central bank sold an unspecified amount of dollars on Thursday, helping to strengthen the shilling to 88.80/89.10 at 1245 GMT, from 89.45/55 earlier in the session. The shilling had closed at 88.75/85 to the dollar last Thursday.
“For the next couple of days the shilling may rally a bit, but the sentiment is still for a weak shilling,” said Chris Muiga, senior trader at National Bank of Kenya.
Muiga added that the shilling’s direction in the coming days would depend on any further central bank action.
Traders said they expect the shilling to trade between 88.50 to 89.50 to the dollar in the week ahead.
Nigeria’s naira currency is seen under pressure next week after oil prices continued to decline and offshore investors sold down their local debt holdings.
By 1200 GMT on Thursday, the currency was trading at 163.90 naira to the dollar, compared with Wednesday’s close of 163.45 naira due to strong demand from importers and other forex end users. The naira closed at 162.90 to the dollar last Thursday.
“We have seen strong buying interest from some offshore investors in the last couple of days, while the market is actually jittery on the continued drop in the oil price in the international market,” one dealer said.
Oil traded slightly lower below $99 a barrel on Thursday, pressured by ample supply.
The Nigerian currency crossed the 163 to the dollar level on Wednesday despite intervention by the central bank. The bank has been selling undisclosed amounts of dollars directly to lenders this week to try to stabilise the naira, which has declined by about 3.5 percent this year.
Dealers said the ability of the central bank to continue to support the local currency would depend on the oil price and monetary policy measures to stem the drift.
The central bank’s monetary policy committee is due to meet this Friday to set Nigeria’s key interest rate.
Ghana’s cedi is expected to rally in the coming week, buoyed by the start of talks between the government and the International Monetary Fund, Stanbic Bank said in a report.
Ghana opened talks with the Fund on Tuesday, hoping to restore its fiscal balance, stabilize its currency, trim inflation and lower a budget deficit as well as push forward a broader series of economic reforms.
Another trader said he expected caution in the week ahead as the market waited for economic developments.
“It’s a cautious market as offshore buyers keep a low interest to see how things unfold with the economy. This, coupled with more selling on the local side, is expected to benefit the local unit in the days ahead,” said Michael Akpakli of Barclays.
He said the cedi would trade within the 3.45 to 3.50 band next week. The currency stood at 3.45 on Thursday, according to Thomson Reuters data, slightly down on the day.
The Ugandan shilling is seen trading slightly weaker next week, undermined by scarce inflows after a Treasury auction failed to attract offshore interest.
At 1017 GMT commercial banks quoted the shilling at 2,610/2,620, little changed from last Thursday’s close of 2,608/2,618.
“Inflows will likely remain scarce so I would expect a marginally weaker shilling,” said David Bagambe, trader at Diamond Trust Bank.
“We had banked on the auction to draw offshore investors but we have seen no inflows from them.”
Although yields at Wednesday’s Treasury bill auction went up across all tenors, Bagambe said offshore investors were probably waiting for rates to climb further before showing more appetite.
The local currency is down 3.4 percent against the dollar this year.
Tanzania’s shilling is expected to hold steady against the dollar or gain slightly due to expected sales of the U.S. currency by companies to meet their quarterly tax payments.
Commercial banks quoted the shilling at 1,665/1,675 to the dollar on Thursday, weaker than 1,667/1,672 a week ago.
“Next week we hope to see a stable shilling, and it could appreciate due to the fact that some corporates will be offloading dollars at the end of the third quarter to pay taxes in the local currency,” said Hakim Sheikh, a trader at Commercial Bank of Africa, Tanzania.
“The shilling is currently getting support from the central bank, but we are not seeing any substantial U.S. dollar inflows from key sectors, particularly tourism and agriculture at this stage.”
Market participants said they expect the shilling to trade in a tight 1,660-1,670 range over the coming days.
The Bank of Tanzania said on its website that it traded $57.8 million on the interbank foreign exchange market over the past week.
The kwacha is likely to remain rangebound against the dollar next week, supported by companies converting hard currency to the local unit to pay month-end obligations including salaries.
At 1139 GMT on Thursday, commercial banks quoted the currency of Africa’s second-largest copper producer weaker at 6.1750 per dollar, compared with 6.1500 a week ago.
“There will be pressure on the kwacha because the dollar continues to trade positively against a basket of major currencies, but companies are likely to come into the market with dollars towards month-end,” one trader said.
The kwacha last week came under pressure due to limited dollar inflows in the absence of a debt auction and strengthening of the dollar globally, he said. (Reporting by George Obulutsa, Oludare Mayowa, Kwasi Kpodo, Elias Biryabarema, Fumbuka Ng‘wanakilala and Chris Mfula; Editing by James Macharia and Susan Fenton)