Kenyan and Zambian currencies are likely to gain against the U.S. dollar next week while those of Uganda and Tanzania are expected to soften.
The Kenyan shilling is expected to strengthen due to inflows from horticulture exports and offshore investors buying stocks as markets players wait for parliament’s decision on lifting a cap on commercial interest rates.
Commercial banks quoted the shilling at 103.25/45 per dollar, compared with 103.80/104.00 at last Thursday’s close.
“We are seeing end month demand subdued by inflows from horticulture and non-governmental organisations ... in the new month markets are waiting for the rate cap decision, we’re seeing bank shares shooting up and that’s another form of inflows,” said a senior trader from one commercial bank.
The kwacha may appreciate against the U.S. dollar next week, supported by an increased supply of hard currency as investors turn to emerging markets after the Federal Reserve slashed interest rates.
On Thursday, commercial banks quoted the currency of Africa’s second-largest copper producer at 13.2700 per dollar from a close of 13.2000 a week ago.
“We could see foreign investors seek high-yielding securities in emerging markets. This could in turn result in a possible increase in U.S. dollar supply,” the Zambian branch of South Africa’s First National Bank (FNB) said in a note.
The Uganda shilling is expected to weaken due to increased dollar demand from consumer goods importers preparing for December festivities.
Commercial banks quoted the shilling at 3,710/3,720, compared to last Thursday’s close of 3,725/3,735.
“Importers are starting to exert higher demand that we normally anticipate around this time,” said a trader at a leading commercial bank, referring to importers of textiles, leather products and fuel. He said the shilling could weaken to around 3,730 in coming days.
The Tanzanian shilling is expected to weaken due to increased U.S. dollar demand.Commercial banks quoted the shilling at 2,300/2,310 compared with last Thursday’s close of 2,296/2,306.
“There is a pressure on the shilling which is expected to continue next week because of the high demand for dollars mainly driven by oil importers, manufacturers and telecoms,” a trader at one commercial bank in Dar es Salaam said.