Nigeria naira to extend gains vs dollar
NAIROBI, July 21 – Nigeria’s naira is seen extending gains against the dollar in the coming week mainly due to dollar inflows from the energy sector, while greater offshore interest in Kenya’s bond market might support the shilling.
NIGERIA
The naira is expected to gain further next week as currency dealers anticipate increased dollar inflows from energy companies selling their month-end greenbacks to some lenders.
Many of the oil firms operating in Africa’s top crude exporter usually sell dollars at the end of the month to obtain local currency for their domestic obligations.
The naira was trading at 152.15 per dollar on the interbank market on Thursday, firmer than 152.20 Wednesday’s close.
“Despite the unmet demand at the central bank’s auction yesterday (Wednesday) the naira has not depreciated because some banks have dollars from foreign investors who brought funds for investment in local bonds,” one dealer said.
Nigeria’s central bank sold $250 million at 150.40 naira to the dollar, less than the $362 million demanded.
Traders said with more dollar inflows, the naira should appreciate to around 151.60-152 a dollar in the coming days.
KENYA
The Kenyan shilling might rise against the dollar next week, helped by offshore investors selling dollars to invest in fixed income securities, encouraged by rising yields.
But traders said the local currency would also face headwinds from end-month dollar demand from importers and an injection of shillings by the central bank through reverse repos.
The Central Bank of Kenya (CBK) eased liquidity in the money market twice this week by selling 19.09 billion shillings ($212 million).
At 1201 GMT, the shilling was posted at 89.95/90.05 against the dollar, weaker than last Thursdays close of 89.60/70.
“Right now we are heading to end-month and you would expect it to weaken on the back of (dollar) demand. Also with (the central bank) pumping in liquidity you would expect it to weaken. But it’s defying all this and has strengthened a bit,” said Kennedy Butiko, deputy head of treasury at Bank of Africa.
“The offshore guys are being attracted by the current high interest rates that are there (in the bond market). Depending on the dollar inflows that might come in from those we might see a stronger shilling.”
Yields on Kenya’s two-year and 10-year Treasury bonds rose at auction on Wednesday as the Central Bank rejected more than half of all bids.
UGANDA
Uganda’s shilling is seen holding steady against the dollar over the next week with a bias to weaken, with typical end-of-month greenback demand from the energy and manufacturing sectors.
After tumbling through a string of all-time lows in the first half of the year, hitting a record low of 2,710 on June 30, the shilling has steadied in a range of 2,520-2,600 in the last ten days after the central bank sold hard currency on July 1.
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