Forex Trading News – African Currencies High in Demand
African currencies are likely to hold up against the U.S. dollar next week as companies make domestic tax payments, with only Ghana’s struggling cedi seen bucking the trend after touching fresh three-year lows on Thursday.
Commercial banks quoted the shilling at 87.30/50 to the greenback on Thursday, up from 87.80/90 a week ago.
“The shilling will strengthen, but it will be very gradual, because there would be a lot of end-month importer demand also picking up from next week,” Andlip Nazir, a senior trader at I&M Bank said.
Traders expected the central bank to intervene should the shilling weaken past 88.20, while gains were seen capped at 87.20.
The Ugandan shilling was seen trading in a stable range as companies paid their taxes in the local currency, keeping a lid on demand for dollars.
The shilling traded at 2,570/2,580 at 1050 GMT, weaker than last Thursday’s close at 2,555/2,565.
“I don’t see the shilling breaking out of the 2,550-2,580 range in the short term,” said Faisal Bukenya, head of market making at Barclays Bank.
Traders expected the Tanzanian shilling to gain some ground in the days ahead, helped by greenback sales by corporates to meet quarter-end tax obligations.
Commercial banks quoted the shilling at 1,684/1,689 to the dollar on Thursday, stronger than 1,685/1,695 a week ago.
“I think dollar demand will keep shrinking as we are approaching the end of the quarter,” said Hamisi Mwakibete, head of trading at Commercial Bank of Africa Tanzania.
The kwacha is likely to firm after Zambia’s central bank tightened monetary policy, signalling its intention to prop up a currency that recently plumbed all-time lows.
On Thursday, commercial banks quoted the kwacha at 6.1250 per dollar, up from 6.3000 seven days ago.
The Bank of Zambia on Monday raised the effective annual lending rate to 28 percent from 21 percent, a move market analysts said would attract foreign investors to government securities, boosting the kwacha.
Traders expected Nigeria’s naira to strengthen on the back of dollar sales from some oil companies and possible direct intervention by the central bank next week.
The currency closed at 160.90 to the dollar on the interbank market on Thursday, up from 163.10 the previous day.
Ghana’s cedi is expected to be the outlier among regional currencies, weakening further as importer demand continues to far outweigh dollar supply.
The local currency has slumped nearly 30 percent since January and hit a three-year low of 3.0700/3.1000 on Thursday.
“We expect the current trend to continue in coming weeks because there is still a huge demand for the dollar that, neither commercial banks nor the central bank can meet,” a local dealer said.
“There is no liquidity so interbank trading is virtually shutdown.”
The Bank of Ghana last Friday reversed restrictions it had imposed in February on foreign exchange transactions to try and halt the cedi’s slide, but which the IMF said would be ineffective unless Accra resolved macro-economic imbalances.
The bank also said it would ask the government to direct mining and oil firms to operate retention accounts in Ghana to boost foreign exchange inflows.