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Africa, Forex

AFRICA-FX-Kenyan shilling seen stronger; Uganda, Zambia weaker

NAIROBI, June 17 (Reuters) – Kenya’s currency is likely to gain marginally against the U.S. dollar next week as Uganda and Zambia’s weaken. Nigerian and Tanzanian currencies are forecast to hold steady.

KENYA

The Kenyan shilling is expected to trade slightly more strongly next week, underpinned by positive market sentiment partly fuelled by an expected Eurobond sale.

At 0730 GMT, commercial banks quoted the currency of east Africa’s largest economy at 107.70/90, compared to last Thursday’s close of 107.80/108.00

“It could strengthen a little bit more, there’s a bit of positive sentiment from floating of the Eurobond, and also the World Bank loan,” a trader at one bank said.

Kenya is expected to sell $1 billion worth of Eurobonds this month. It has also received a $750 million loan from the World Bank to support its budget and help the economy recover from the effects of the COVID-19 pandemic.

UGANDA

The Ugandan shilling is expected to weaken after a surprise central bank decision to cut its benchmark rate.

At 0909 GMT, commercial banks quoted the shilling at 3,530/3,540, compared to last Thursday’s close of 3,515/3,525.

On Wednesday the central Bank of Uganda (BoU) cut its policy rate by 50 basis points to a historic low of 6.5% saying recovery from the ravages of the COVID-19 pandemic still needed monetary policy support.

“We will see some (shilling) weakening as players price in the decision,” a trader at one bank said.

ZAMBIA

The kwacha is expected to remain on the back foot against the dollar, with inadequate supply of hard currency.

On Thursday, commercial banks quoted the currency of Africa’s second largest copper producer at 22.5600 per dollar from 22.5395 at the close of business a week ago.

“Interim trends suggest that the local unit will likely trade between K22.560 and K22.800 in the short to medium term,” Access Bank said in a note.

NIGERIA

Nigeria’s naira is seen range-bound on the official market in the coming week as the central bank intervenes to support it after last month’s devaluation, traders said.

The currency traded at 411.50 naira per dollar on the spot market on Thursday, to stay within a range of between 407 naira and 412 naira it has traded at since this month.

The World Bank this week urged Nigeria to provide a clearer and more predictable foreign exchange management system, after the central bank unified the country’s official rates in May, effectively letting the naira weaken by 7.7%.

The naira firmed on the black market to 485 to the dollar on Thursday, a week after it slid past a more than three-and-half year low of 500 naira on the informal market.

TANZANIA

Tanzania’s shilling is expected to hold steady next week as demand for the U.S. dollar from manufacturing and energy importers balances inflow from investments in government bonds.

Commercial banks quoted the shilling at 2,314/2,324 on Thursday, unchanged from last week’s close.

“The shilling should remain supported over the coming seven days on the back of increased investments in the government bonds,” Terry Karanja, a treasury associate at Nairobi-based FX trading firm AZA, said. (Reporting by Elias Biryabarema, Chris Mfula, Chijioke Ohuocha and Nuzulack Dausen; Editing by Alexander Smith)


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