Currency Outlook: African Markets Face Varied Pressures

The currencies of Kenya, Nigeria, and Zambia are expected to experience depreciation, while Ghana’s cedi remains stable and Uganda’s shilling may strengthen. Kenyan banks are paying dividends impacting the shilling, Nigeria’s naira faces rising dollar demand, and Zambia’s kwacha struggles with currency supply issues.

The currencies of Kenya, Nigeria, and Zambia are projected to experience downward pressure in the coming week, while Ghana’s currency is expected to remain stable, and Uganda’s currency may appreciate against the US dollar, according to market traders.

In Kenya, the shilling is anticipated to weaken as banks distribute last year’s dividends. Current quotes indicate the shilling at 129.30/129.50 against the dollar, increasing from last week’s close of 129.00/129.40. A trader noted, “As banks announce their results, offshore people will be looking to buy dollars to repatriate their dividends,” suggesting potential for further depreciation if the central bank does not intervene.

Nigeria’s naira is forecasted to decline in both official and parallel markets due to heightened foreign currency demand exceeding central bank supply. Recently, the naira was quoted at approximately 1,550 per dollar, a significant rise from the prior week’s closing rate of 1,520. A trader remarked, “Rising dollar demand has upset the stable rates we’ve seen… I see rates falling further unless supply improves.”

The Ghanaian cedi is expected to remain stable, supported by intervention from the central bank. The currency, quoted at 15.45 to the dollar, has not fluctuated since last week. Chris Nettey, head of trading at Stanbic Bank Ghana, stated, “Cedi has maintained its stability… We expect this trend to continue into next week,” indicating a favorable outlook for the cedi’s performance.

In Uganda, the shilling is likely to appreciate as businesses prepare to meet mid-month tax obligations. It is currently quoted at 3,662/3,672 to the dollar. A trader suggested that a reduction in demand for dollars might allow the local currency to strengthen, with expectations that it will trade between 3,630 and 3,660 against the dollar.

Zambia’s kwacha is anticipated to struggle due to increased demand for foreign currency coupled with limited supply. The kwacha was quoted at 28.58, down from 28.70 the previous week. Access Bank commented, “Foreign currency conversions may not be sufficient to trigger gains but could merely slow depreciation,” attributing the currency’s decline to rising imports of essential goods such as food and electricity.

In summary, the currencies of Kenya, Nigeria, and Zambia face significant pressures, primarily due to rising demands and insufficient supply. Conversely, Ghana’s cedi enjoys stability through central bank support, while Uganda’s currency may strengthen amidst seasonal tax payments. These developments present a complex landscape for African foreign exchange markets, indicating potential volatility ahead.

Original Source: www.tradingview.com