Naira and Ugandan Shilling Face Pressure, Kenya, Ghana and Zambia Hold Steady

ABUJA, Oct 22: The naira and Ugandan shilling are expected to weaken against the dollar in the next week to Thursday, while Kenya's shilling, Ghana's cedi and Zambia's kwacha are likely to remain stable, traders said. The pressure on the naira comes from importers buying hard currency ahead of the holiday season and investors taking profits on securities.

Naira risks slide past 1,340

The naira was quoted at 1,339 on the official market on Thursday, compared with 1,331 a week earlier. It was changing hands at 1,370 to the dollar in street trading. A trader said the naira risked sliding further if it breached the 1,340 level, and that central bank intervention would be needed next week to ease pressure on the currency.

Ugandan shilling extends losses

Uganda's shilling is seen extending its losses in the coming days, pressured by strong dollar demand from energy and merchandise importers. A central bank dollar sale could help slow the pace of depreciation. Commercial banks quoted the shilling at 4,250/4,260 to the dollar, compared to last Thursday's close of 4,045/4,055. A trader said the central bank's dollar sale on Thursday would help absorb some demand but was unlikely to reverse the shilling's losing trend.

Kenya, Ghana and Zambia steady

Kenya's shilling will likely hold steady against the dollar. Commercial banks quoted it at 129.80/130.00 per dollar, the same as last Thursday's close. A trader said, 'We have seen some dollar strength in recent days, with the shilling touching almost 130,' adding that month-end dollar demand was likely to keep the currency trading in the 128-130 to the dollar range.

Ghana's cedi is expected to remain near current levels, supported by improved dollar supply and growing liquidity on the interbank market. LSEG data showed the currency trading at 11.54 to the dollar, from 11.63 a week ago.

Andrews Akoto, head of trading at Absa Bank Ghana, said, 'Decent mining-related FX inflows should continue to offer the local unit favourable tailwinds against the dollar in the coming week, as energy and commerce sector FX demand moderates.' Ronald Mensah, a trader at Stanbic Bank Ghana, said scheduled dollar sales by artisanal gold marketing agency GoldBod should provide support for the cedi in the near term.

Zambia's kwacha is also seen range-bound as corporates continue selling dollars for month-end payments. On Thursday, commercial banks were selling the dollar at 20.37 from 20.18 a week ago. A financial analyst said, 'The pressure is still there but companies need to make huge payments in the local currency.'

For Nigerian businesses, the immediate focus is the 1,340 level. A breach would raise the risk of further naira weakness and increase the need for central bank intervention, according to the trader.