KAMPALA, Oct 17 (Reuters) – Traders expect Uganda’s shilling to strengthen against the dollar next week, but predict a weakening of the Tanzanian currency and those of Kenya and Zambia to hold steady.
The Ugandan shilling is forecast to strengthen against the U.S. dollar next week, helped by hard currency inflows from investors buying government debt.
At 0949 GMT commercial banks quoted the shilling at 3,685/3,695 per dollar, compared to last Thursday’s close of 3,680/3,690.
“The auction is expected to draw some inflows from offshore investors and if that materialises we will likely see the shilling keep an upward (strengthening) bias,” said a trader at a leading commercial bank.
Uganda’s central bank is next week expected to auction a total of 120 billion shillings ($32.56 million) worth of Treasury bills of various maturities.
Tanzania’s shilling is likely to face pressure, with traders forecasting more demand for U.S. dollars from importers.
Commercial banks quoted the shilling at 2,297/2,307 on Thursday, slightly lower from 2,294/2,304 a week earlier.
“The demand side will be driven by importers, mainly oil traders and manufacturers, while the major supply we are expecting is from agriculture exports, especially cashew nuts which did not happen this week,” one senior commercial bank trader said.
The Kenyan shilling is seen stable against the dollar in due to tightening liquidity in the local money market as banks buy shillings to meet local reserve ratio requirements, traders said.
Commercial banks quoted the shilling at 103.65/75 per dollar, compared with 103.70/90 at last Thursday’s close.
“We’ve seen a slight gain for the local currency thanks to mop up efforts by the regulator and also the beginning of a new credit reserve ratio cycle,” a senior trader from one commercial bank said.
Zambia’s kwacha is expected to continue trading sideways next week as tight liquidity curtails U.S. dollar demand from importers and buyers.
On Thursday, commercial banks quoted the currency of Africa’s No.2 copper producer at 13.1700 per dollar from a close of 13.1500 a week ago.
“The local unit will likely remain range bound with limited moves to the downside should liquidity remain tight,” Cavmont Bank said in a note. (Reporting by Elias Biryabarema, Nuzulack Dausen,John Ndiso and Chris Mfula; Compiled by Chris Mfula; Editing by Alexander Smith)