Naira seen easing from 5-1/2 week high

Nigeria's naira strengthened to 157.15 to the dollar on the back of large dollar flows from energy companies.

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Nigeria's naira strengthened to 157.15 to the dollar on Thursday on the back of large dollar flows from energy companies, but dealers said it would probably weaken a little next week because of demand for the local currency.

“Technically, we are below the central bank rate at this level and the rate will inch up in the coming days as dollar liquidity thins out,” one dealer said.

Dealers said a unit of Chevron sold $36 million to banks on Thursday, while the market continued to react to the flow of $800 million from the state-owned energy company, NNPC, this week.

“The market is presently liquid with the dollar inflows from NNPC and other oil companies this week. But we equally have demand for the dollar,” another dealer said.

The central bank sold $120 million at 155.75 to the dollar at Wednesday's bi-weekly forex auction. The central bank sells dollars to importers through their banks and charges one percent commission on each dollar sold.

Nigeria's naira has traded between the band of 157.40-157.95 in the past three weeks because of dollar flows from energy companies and offshore investment in local debt.

GHANA

The cedi could remain under pressure due to persistent dollar craving by local manufacturers and telecom firms that has pushed it to a string of record lows this week, traders said on Thursday.

The cedi extended its slide into this week, hitting fresh lows against the dollar each day as firms and importers gobbled up greenbacks, frustrating renewed central bank measures to stabilise the local unit.

On Wednesday, it closed at a record low of 1.8220.

Barclays Bank Ghana trader Jacob Brobbey said corporate demand for the greenback remained firm and that the pair could rise to 1.8270 next week.

“I expect the pressure on the local unit to persist into next week unless there is improved real dollar supply,” he said.

Last Friday, the Bank of Ghana raised its prime interest rate 100 basis points to 14.5 percent in a bid to halt the cedi's steep losses.

It also said it would ease banks' net open position requirements - the difference between their assets and liabilities in a particular currency - to boost their foreign exchange flows to the market.

The cedi has fallen more than 1.5 percent since the announcement as dollar-hungry dealers shrugged off the move.

KENYA

Kenya's shilling is expected to trade within its recent range next week, supported by tight liquidity due to the central bank's open market operations and dollar inflows from offshore investors buying into a new two-year bond.

Traders said they expected the central bank, which soaked up 31.65 billion shillings ($380.6 million) over the last two weeks, to keep a keen eye on liquidity and intervene with repurchase agreements at any point.

Persistent mop-ups by the regulator helped stabilise the average interbank rate, which rose to 17.1 percent on Wednesday, after it fell to 10.2 percent on April 5.

“The central bank is worried about increasing shillings and will keep mopping up whenever excess liquidity rears its head,” said Bhavin Chandarai, a trader at Imperial Bank.

At 0954 GMT, commercial banks quoted the shilling at 83.10/30 per dollar, firmer than last Thursday's close of 83.25/45, but within the recent range of 83.00-83.50.

Traders said they expected inflows from foreign investors buying into a two-year bond worth 5 billion shillings to be auctioned on April 25.

The central bank is also scheduled to sale 91- and 182-day Treasury bills worth 4 billion shillings next week.

Government bond yields continue to edge down in oversubscribed sales as investors track down inflation that fell to 15.6 percent in March and central bank held its benchmark rate steady at 18 percent for a fourth straight month in April.

The shilling has gained 2.5 percent against the dollar this year, and is off a record low of 107 per dollar hit in October, partly aided by offshore interest in debt and the central bank's hawkish stance adopted late last year.

“Foreign investors flocking into the two-year bond sale next week will also offer support,” said a trader at one commercial bank.

UGANDA

The Ugandan shilling is forecast to hold steady against the dollar, helped by market expectations of offshore investor interest in Wednesday's Treasury bond auction.

The Bank of Uganda (BoU) is due to sell a 3-year Treasury bond worth 100 billion shillings ($40 million).

At 1204 GMT commercial banks quoted it at 2,510/2,520, unchanged from last Thursday's close.

“There are dividend payments by foreign corporates, especially in the financial services sector which could exert some demand,” said Ahmed Kalule, a trader at Bank of Africa.

“But overall inflows from foreign investors eyeing the bond should keep the shilling stable over one week.”

He said the currency would oscillate between 2,490 and 2,530 as its support and resistance levels respectively.

Analysts say yields on Ugandan debt will remain relatively high on the back of the central bank's decision to pause its monetary policy easing cycle this month.

Despite a steep fall in inflation, the bank decided to keep its key lending rate at 21 percent this month from March.

The BoU is keen to keep Ugandan debt attractive for foreign investors, whose dollars prop up the local currency in an economy with a weak export base.

“We do expect demand from importers like oil companies but since we have an auction inflows are likely to be sufficient to keep the shilling stable,” said a trader from a leading commercial bank.

GHANA

The cedi could remain under pressure next week due to persistent dollar craving by local manufacturers and telecom firms that has pushed the currency to a string of record lows this month, traders said.

The cedi extended its slide into this week, hitting fresh lows against the dollar each day as firms and importers gobbled up greenbacks, frustrating renewed central bank measures to stabilise the local unit

On Wednesday, the cedi rate closed at a record low of 1.8220, after opening at 1.8195.

Barclays Bank Ghana trader Jacob Brobbey said corporate demand for the greenback still remained firm and that the pair could rise to 1.8270 next week.

“I expect the pressure on the local unit to persist into next week unless there is improved real dollar supply,” on the market,” he told Reuters. Last Friday, the Bank of Ghana raised its prime interest rate 100 basis points to 14.5 percent in a bid to halt the cedi's steep losses. It also said it would ease banks' net open position requirements - the difference between their assets and liabilities in a particular currency - to boost their foreign exchange flows to the market. The cedi has fallen more than 1.5 percent since the announcement as dollar-hungry dealers shrugged the move.

TANZANIA

Tanzania's shilling is seen holding steady against the dollar due to a liquidity squeeze on the local currency and reduced demand for the U.S. currency.

Commercial banks quoted the shilling at 1,585/1,595 to the dollar on Thursday, weaker than 1,580/1,587 a week ago.

“Based on the prevailing situation, we expect the shilling to trade in the same levels next week. The shilling will likely remain stable until the end of April,” said Theopistar Mnale, a trader at Tanzania Investment Bank.

“The liquidity situation on the shilling is still very tight,” Mnale added. “Most of the banks are struggling to find shillings but there is some fear, especially in the foreign exchange market, whereby people don't want to expose their dollars too much.”

Traders said the local currency is likely to trade in the 1,580-1,590 range in the days ahead, amid high interbank interest rates.

“We expect the shilling to trade in the same levels over the coming days. The expected month-end dollar inflows should not have any significant impact on the market,” said Barton Hamisi, a trader at National Bank of Commerce, a unit of South Africa's ABSA.

“We are also not witnessing any major inflows of dollars in and the liquidity tightness on the shilling is yet to go away.”

The Bank of Tanzania said on its website it traded $32.1 million on the interbank forex market in the last week. - Reuters

Source: http://www.iol.co.za/naira-seen-easing-from-5-1-2-week-high-1.1280100

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