UPDATE 1-AFRICA FX-East Africa currencies seen stable, naira could strengthen

Thu Jul 31, 2014 11:31am EDT

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(Adds Tanzania currency)

JOHANNESBURG, July 31 (Reuters) - East African currencies are likely to hold largely steady against the dollar next week, but the Nigerian naira could gain as energy companies offload dollars and foreign investors buy local debt.

KENYA

At 0931 GMT on Thursday, commercial banks quoted the Kenyan shilling at 87.70/90 to the dollar, compared with a close of 87.80/90 a week ago.

"It might appreciate a bit once the month-end demand (for dollars) is over, but I think the range will still be 87.50 to 88.00," African Banking Corporation trader Julius Kiriinya said.

Traders expected the shilling to come under pressure in coming months due to lower dollar receipts from the tourism sector after a series of militant attacks prompted travel warnings by some Western governments.

UGANDA

The Ugandan shilling is expected to find support from the central bank intervening to mop up excess liquidity in the interbank market, while dollar demand from companies is likely to be sluggish.

At 1133 GMT the shilling was at 2,620/2,630, stronger than last Thursday's close of 2,627/2,637.

"There was a lot of liquidity in the interbank, possibly from government releases but we had a mop-up today," said Sage Daniel Muganza, a trader at Centenary Bank.

The Bank of Uganda absorbed 200 billion Ugandan shillings ($76 million) in total through a repo sale.

Crane Bank dealer Shahzad Kamaluddin said the shilling would likely oscillate between 2,620 and 2,630 over the next week.

TANZANIA

The Tanzanian shilling is expected to strengthen slightly against the U.S. dollar in the days ahead due to the expected easing of a liquidity squeeze on the local currency.

Commercial banks in east Africa's second-biggest economy quoted the shilling at 1,656/1,665 to the dollar on Thursday, stronger than 1,662/1,667 a week ago.

"We expect the shilling to appreciate slightly next week due to the possible loosening of the liquidity squeeze on the local currency," said Flora Mrema, a trader at TIB Development.

"The central bank has been buying dollars in the market to try to inject more shillings into the market."

Market participants said they expect the shilling to trade in a tight 1,650-1,660 range over the coming days.

The Bank of Tanzania said on its website that it traded $15.25 million on the interbank foreign exchange market over the past week.

NIGERIA

Nigeria's naira is likely to trend firmer next week as major energy companies operating in Africa's top crude exporter offload dollars and offshore investors buy local debt, market players said.

The naira has been steady within a 161.50-161.90 range over the past fortnight, propped up by demand from energy firms needing to make domestic month-end payments.

The Nigerian unit of ExxonMobil sold $50 million to some lenders on Thursday.

The local currency traded at 161.90/dollar at 1359 GMT, little changed from Wednesday's close at 161.85.

"We are expecting more dollar flows from some oil companies that are yet to come to the market, including the NNPC," one dealer said, referring to the state-owned Nigerian National Petroleum Corporation. (Reporting by George Obulutsa, Elias Biryabarema; and Oludare Mayowa; Editing by Stella Mapenzauswa and Mark Heinrich)

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