July 17, 2014 / 2:31 PM / 3 years ago

WEEKAHEAD-AFRICA FX-Ghana's cedi seen firming ahead of Eurobond

NAIROBI, July 17 (Reuters) - Ghana’s $1.5 billion Eurobond issue due later this month is expected to boost the flagging cedi, while Nigeria’s naira is seen stuck in a range.

GHANA

Ghana’s cedi could begin a gradual recovery against the dollar in coming weeks on offshore greenback sales, boosted by expected Eurobond and cocoa inflows, traders said.

The local unit has remained stable in the past two weeks, after plunging about 30 percent in the first half of the year due to a shortage of dollars and concerns over a weak economy. It was trading at 3.4050 to the dollar at 1220 GMT on Thursday.

Analysts forecast depreciation at a significantly lower pace in the second half of the year as cocoa inflows kick in.

“The cedi’s depreciation has eased significantly as a result of this improvement in (offshore) inflows. We are likely to see some gains in local currency (against the greenback) if forex improves further,” a Barclays Bank Ghana analyst said.

Finance minister Seth Terkper on Wednesday cut the government’s 2014 growth target and forecast a wider budget deficit and higher inflation, citing falling revenues, the slide of the cedi and declining gold prices.

Ghana is set to issue a third Eurobond of up to $1.5 billion later this month. The government will also sign a syndicated loan of $2 billion for next year’s cocoa purchases, Terkper said, noting that the inflows will boost the country’s reserves in support of the cedi.

NIGERIA

Nigeria’s naira is seen stuck in a tight range in the coming week, drawing support from possible dollar flows from offshore investors and foreign energy companies selling dollars to banks.

The local currency has traded around 161.90-162.70 against the dollar in the last two weeks on support from consistent greenback flows from oil companies’ month-end dollar sales and inflows from offshore investors buying local debt.

The naira traded at 161.85 to the dollar on Thursday, compared with its 161.90 close the previous day, and traders see no major change in the value of the currency in the near term.

“Market is dollar liquid to support the present demand from importers, we are not expecting very much change from the present value of the naira as long as there’s continuous dollar flow,” one dealer said.

KENYA

The Kenyan shilling is expected to ease in the week ahead due to increased liquidity in the money markets and falling short-term debt yields.

At 0735 GMT, banks quoted the shilling at 87.70/80 to the dollar, compared with last Thursday’s close of 87.60/70.

“The shilling in coming days should be under pressure once the corporate taxes are paid. So the liquidity in the market would weigh on the shilling,” one senior trader said.

“The market will be liquid and also declining interest rates in the short term should support the dollar.”

The weighted average interbank lending rate rose slightly on Thursday to 7.1248 percent from 7.0697 percent a day earlier, but was still below the 7.3925 percent level seen last week.

During Wednesday’s auction, the weighted-average yield on the 182-day Treasury bills fell to 10.430 percent from 10.970 percent last week.

TANZANIA

The Tanzanian shilling is expected to remain steady against the U.S. dollar in the days ahead and could weaken slightly if the liquidity squeeze on the local currency eases, traders said.

Commercial banks in east Africa’s second-biggest economy quoted the shilling at 1,657/1,667 to the dollar on Thursday, stronger than 1,662/1,672 a week ago.

“We expect the shilling to trade at current levels next week, but the local currency could depreciate if the tight liquidity situation eases,” TIB Development Bank dealer Theopistar Mnale said.

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

UGANDA

The Ugandan shilling is forecast to firm in coming days, boosted by positive market sentiment due to an expected surge in export earnings and an uptick in government debt rates.

At 0953 GMT commercial banks quoted the shilling at 2,610/2,620, up from last Thursday’s close of 2,663/2,673.

“There’s favourable sentiment in the market for the shilling coming from the news on exports,” Crane Bank trader Shahzad Kamaluddin said.

“The rise on yields at yesterday’s auction is also strengthening confidence ... overall the shilling looks poised for strong gains,” he said.

State-run Uganda Export Promotion Board (UEPB) forecast this week that 2014 export earnings would grow by 15 percent from last year, boosted by broader regional market access. (Reporting by Kwasi Kpodo, George Obulutsa, Elias Biryabarema, Fumbuka Ng‘wanakilala and Oludare Mayowa; Editing by Drazen Jorgic and Louise Ireland)

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