AFRICA-FX- Kenyan shilling seen on back foot, Tanziania’s firming

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The Kenyan shilling is expected to trade on the back foot this week while that of Tanzania is seen strengthening and the Nigerian, Ugandan and Zambian currencies holding steady.

KENYA

The Kenyan shilling could come under pressure this week  due to U.S. dollar demand from the energy and manufacturing sector outweighing inflows from remittances and horticulture exports, traders said.

Commercial banks quoted the shilling at 106.45/65 per dollar, compared with 106.35/55 at last Thursday’s close.

“We are seeing end month demand spill over into the new month. There has been good demand from the oil sector and manufacturers who haven’t covered their (dollar) requirements,” said a senior trader from one commercial bank.

TANZANIA

Tanzania’s shilling is expected to firm against the greenback as businesses activities pick up after slowing due to restrictions to curb the spread of the coronavirus.

Commercial banks quoted the local currency against the U.S. dollar at 2,310/20 on Thursday, the same rates recorded the week earlier.

“We expect some inflows in the market because business operations are resuming now after slowing down due to coronavirus. Also, the World Bank announcement that Tanzania has moved to the lower middle income country status is highly likely to strengthen our shilling in the coming weeks,” one commercial bank trader said.

NIGERIA

Nigeria’s naira is likely to trade unchanged across markets on expectations the central bank will boost intervention to businesses and individuals to ease dollar shortages that have plagued the country for months.

The naira opened at 386.86 on the over-the-counter spot market, traded by investors on Thursday, as against 361 on the official market, backed by the central bank.

The central bank, the main source of dollars in Nigeria, has been selling hard currency to firms and individuals. Traders expect the bank to step up sales to ease pressure on the naira, especially on the black market, where it is trading around 460.

“The central bank is intervening and that’s where the activity is,” one trader said, describing the lack of liquidity on the market. “It’s not everyone that gets the dollar so demand keeps going to the black market.”

UGANDA

The Ugandan shilling is seen trading little changed in the coming weeks as appetite for hard currency remains mostly subdued among importers of merchandise.

Commercial banks quoted the shilling at 3,720/3,730, compared to last Thursday’s close of 3,735/3,745.

Consumer spending is very thin, said an independent foreign exchange trader in the capital Kampala, because of widespread joblessness and depressed incomes caused by the effects of the coronavirus.

“As a result importer activity has declined substantially and that has kept hard currency appetite thin,” he said.

The shilling, he said, would likely swing in a 3,700-3,720 range.

ZAMBIA

The kwacha is likely to remain range-bound against the dollar this week supported by reduced demand for hard currency among importers.

On Thursday, commercial banks quoted the currency of Africa’s second largest copper producer at 17.9500 per dollar from 18.0340 at close of trading a week ago.

“In the absence of other key fundamentals, subdued demand on the back of reduced import activities will remain a critical driver for direction,” Zambia National Commercial Bank (ZANACO) said in a note.

Credit:Reuters

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