Currency Outlook: Pressures on Kenyan, Nigerian, and Zambian Currencies

Kenya, Nigeria, and Zambia’s currencies forecasted to weaken, while Ghana’s will remain stable and Uganda’s could strengthen. Kenya’s shilling may decline due to dividend payouts, Nigeria’s naira under pressure from high dollar demand, and Zambia’s kwacha weakened by currency demand and imports. Ghana’s cedi expected to hold steady with central bank support.

The currencies of Kenya, Nigeria, and Zambia are projected to experience pressure in the upcoming week, while Ghana’s currency is anticipated to remain stable and Uganda’s may strengthen against the U.S. dollar, according to traders.

In Kenya, the shilling is expected to weaken as several banks distribute last year’s dividends. Commercial banks indicated that the shilling was trading at 129.30/129.50 to the dollar, a decline from the previous week’s close of 129.00/129.40. A trader remarked, “As banks announce their results, offshore people will be looking to buy dollars to repatriate their dividends,” signaling potential further depreciation unless the central bank intervenes.

In Nigeria, the naira is anticipated to slip in both official and unofficial markets due to heightened demand for foreign currency that exceeds the central bank’s supply. The naira was traded at approximately 1,550 naira to the dollar during intraday trading, compared to the previous week’s closing rate of 1,520 naira. A trader expressed concern, stating, “Rising dollar demand has upset the stable rates we’ve seen in the last couple of weeks.”

Conversely, Ghana’s cedi is expected to maintain stability, bolstered by support from the central bank. As per LSEG data, the cedi remains steady at 15.45 to the dollar, reflecting a balanced demand and supply in the market. Chris Nettey, head of trading at Stanbic Bank Ghana, affirmed, “We expect this trend to continue into next week,” citing ongoing support from the central bank.

For Uganda, the shilling may appreciate as several companies prepare to meet mid-month tax obligations. Banks quoted the shilling at 3,662/3,672 to the dollar, showing stability compared to last week. A trader suggested that the local currency could see some strengthening, stating, “The local unit may draw a bit of strength from that.”

Lastly, Zambia’s kwacha is likely to remain under pressure due to increasing demand for hard currency and limited availability. On Thursday, the kwacha was quoted at 28.58 against the dollar, down from 28.70 the previous week. According to Access Bank, foreign currency conversions may not be significant enough to provoke gains but could only mitigate depreciation, with increased imports exacerbating the situation.

In summary, currency trends in Africa indicate a challenging week ahead for Kenya, Nigeria, and Zambia, with their currencies facing significant pressures. In contrast, Ghana’s cedi is projected to remain stable due to central bank interventions, while Uganda’s shilling may strengthen amidst tax obligations. The dynamics of currency supply and demand will be critical in shaping the exchange rates over the coming days.

Original Source: www.tradingview.com