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Africa Business News of Tuesday, 28 July 2020

Source: reuters.com

AFRICA-FX-Kenyan, Nigeria currencies seen weaker, Uganda’s firmer

Kenyan and Nigerian currencies are likely to come under pressure against the U.S. dollar Kenyan and Nigerian currencies are likely to come under pressure against the U.S. dollar

Kenyan and Nigerian currencies are likely to come under pressure against the U.S. dollar this week as Uganda’s shilling strengthens and Tanzania’s and Zambia’s currencies trade sideways.

KENYA

The Kenyan shilling is forecast to weaken due to increased dollar demand from merchandise importers and the energy sector as business activity resumes following the lifting of COVID-19 related movement restrictions, traders said.

Commercial banks quoted the shilling at 107.25/45 per dollar, compared with 106.75/95 at last Thursday’s close.

“We might see more buying pressure from merchandisers, oil importers. Free movement means a rise in demand for fuel …the inflows are not enough to compensate,” one commercial bank trader said.

NIGERIA

Nigeria’s naira is seen weaker on the black market as demand shifts to the unofficial market after the central bank last week told lenders to stop processing new trade documents for maize imports, traders said.

The naira is quoted on the unofficial market at 470, weaker from 465 per dollar the previous session. The central bank last week adjusted the naira by 5.5% to 380 naira on the official market, close to the over-the-counter spot market, widely used by investors and importers.

The bank has been under pressure from the World Bank and the International Monetary Fund to carry out currency reforms to qualify for budget-support loans, and from the Nigerian government to get more naira for its crude oil receipts.

The central bank this month unified its multiple exchange rates to ease forex shortages that have plagued the country for months, traders said, adding that dollar supplies had yet to improve.

UGANDA

The Ugandan shilling is expected to strengthen in the days ahead as inflows from commodities such as coffee, tea, cotton offset tepid dollar demand.

Commercial banks quoted the shilling at 3,685/3,895, compared to last week Thursday’s close of 3,680/3,690.

“The market is receiving some flows from coffee and other commodities but the demand side is broadly flat,” a trader at one commercial bank said.

The appetite for hard currency from manufacturers and general merchandise importers has been sluggish as the coronavirus lockdown weakened consumer demand.

TANZANIA

Tanzania’s shilling is expected to hold steady this week, with dollar inflows from the mining sector expected to meet importer demand.

Commercial banks quoted the local currency at 2,310/2,320 per dollar on Thursday, the same as last two week Thursday’s close.

“We expect the exports of minerals to contribute to inflows as the economy reopens,” Terry Karanja, a Treasury Associate at Nairobi-based Forex trading firm, AZA, said.

ZAMBIA

The kwacha is likely to remain range-bound against the U.S. dollar as importer demand continues slowing down, giving support to the local unit.

On Thursday, commercial banks quoted the currency of Africa’s second-largest copper producer at 18.2320 per dollar from a close of 10.0840 a week ago.

“The Kwacha is expected to trade on the back foot against the dollar in the interim, but within its newly established range,” Zambia National Commercial Bank (ZANACO) said in a note.