Naira and Ugandan shilling tipped to strengthen against dollar

Traders said on Nov. 5 that the Nigerian naira and Ugandan shilling are expected to strengthen against the dollar in the week to next Thursday, while Ghana’s cedi and Kenya’s shilling should be little changed and Zambia’s kwacha may weaken.

Uganda’s shilling is seen trading with a firming tone ahead of the central bank’s monetary policy meeting on November 9. Commercial banks quoted the shilling at 4,040/4,050 to the dollar, compared with last Thursday’s close of 4,345/4,355. The November 9 meeting comes less than a month after the central bank sharply raised the rate in an emergency move. The last hike initially failed to arrest a slide in the shilling, but the currency has recovered some ground over the past week.

Uganda rate expectations

“We anticipate another hike but of a lower magnitude, so that sentiment or expectation and also the fact that liquidity is really scarce will boost the shilling,” a trader said.

Naira watches US midterms

Nigeria’s naira could rally next week as global risk sentiment improved after the U.S. midterm elections. The naira was quoted at 1,346 to the U.S. currency on the official market on Thursday, compared with 1,349 a week earlier. It was changing hands at 1,400 to the dollar in street trading.

“I expect an appreciation on the naira considering what has happened in the US. Right now there is a bit of risk-on sentiment and that would be positive for our own market,” a trader said.

Ghana, Kenya and Zambia

Ghana’s cedi is expected to be little changed, underpinned by improved market liquidity and easing corporate foreign-currency demand. LSEG data showed the cedi trading at 11.67 to the dollar, compared with 11.63 a week before.

“The currency is likely to remain range-bound in the week ahead, supported by improved interbank liquidity and softer corporate demand as businesses gradually wind down for the festive season,” a trader said. Another trader said he did not expect wide swings in the dollar-cedi rate because dollar demand and supply were matched.

Kenya’s shilling is forecast to be stable. Commercial banks quoted the shilling at 129.85/130.05 per dollar, compared with last Thursday’s close of 129.90/130.00.

Zambia’s kwacha is expected to continue facing headwinds from sustained hard-currency demand for energy and agricultural imports. Commercial banks quoted the kwacha at 20.62 per dollar on Thursday, from 20.55 a week ago.

For naira watchers, the official quote at 1,346 and street rate at 1,400 leave a gap between formal and parallel market pricing.