JOHANNESBURG, April 3 Ghana's cedi is expected to remain under selling pressure after hitting a record low this week with investors worried about the cocoa-producing economy as the government continues to miss spending targets.
Kenya's shilling will be pulled in both directions in coming sessions as the central bank is expected to intervene to offset strong demand for dollars.
Ghana's cedi will continue to face selling pressure due to strong dollar demand from importers and as investor concerns about fiscal slippage overshadow central bank measures to try and support the currency, traders said.
The central bank has introduced a series of measures this year to shore up the cedi but it is down 14 percent against the dollar so far in 2014. It traded at an all-time low of 2.7220/dollar at 1300 GMT on Thursday.
On Wednesday, the Bank of Ghana raised bank reserve requirements to 11 percent from 9 percent, in a bid to stem the cedi's slide and curb inflation, which hit a three-year high of 14 percent in February.
"We do not see that stopping the depreciation of the cedi in anyway. It will only make short-term interest rates go up," a trader said, adding that there was a huge backlog of dollar demand from local importers.
He said wide fiscal slippage recorded by Ghana in the past two years had led to market uncertainty and dwindling confidence in the local currency.
"Markets are worried about the current macroeconomic environment and they are yet to see any concrete plan by the government to address those challenges," the trader said.
Ghana, which produces cocoa, gold and oil, has missed its spending targets since 2012. The west African country recorded a budget deficit of 11.8 percent of gross domestic product in 2012, nearly double its 6.7 percent target, and latest estimates are for a 10.8 percent shortfall for 2013.
The Kenyan shilling is seen in a tug of war in the coming week as central bank liquidity mop-ups offset dollar demand from commercial banks.
The Central Bank of Kenya (CBK) has been regularly intervening in the money markets to drain excess shilling liquidity in recent weeks, a trend which traders say should boost the local currency.
But traders also said there was solid demand for the dollar from commercial banks.
Banks quoted the shilling at 86.40/60 against the dollar at Thursday's close, slightly weaker than last Thursday's close of 86.65/75.
"With the way CBK is mopping up and the demand for the dollar, it just depends who will come out on top," said Eric Gathecha, a trader at I&M Bank.
"(The key will be) how much CBK mops up versus how much demand there is."
The central bank began regularly mopping up liquidity in March after overnight borrowing rates tumbled, making it a bit cheaper for banks to fund long dollar positions, which in turn put pressure on the shilling.
The Ugandan shilling is forecast to trade with a downward bias in the week ahead, weighed down by a rise in dollar demand from companies in the manufacturing and energy sectors.
At 0938 GMT commercial banks quoted the currency of Africa's largest coffee exporter at 2,550/2,560, weaker than last Thursday's close of 2,540/2,550.
Faisal Bukenya, head of market making at Barclays Bank, said there was buying pressure from the manufacturing and energy sectors which would keep the shilling under pressure in coming days.
Bukenya forecast the shilling would trade in the 2,545-2,570 range over the next few sessions, and that it was likely to come under additional pressure because of demand from offshore players cashing in their government debt maturities.
The local currency is down 1.2 percent against the dollar so far this year, and money market analysts say its fall could be cushioned by the central bank's decision to maintain the key lending rate this month.
The Tanzanian shilling will probably show some strength against the dollar next week, buoyed by inflows of the U.S. currency from the tourism and agriculture sectors, traders said.
Commercial banks in east Africa's second-biggest economy quoted the shilling at 1,630/1,640 to the dollar on Thursday, stronger than 1,632/1,642 a week ago.
"We expect the shilling to strengthen slightly in the coming days," said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania.
"There have been some good (dollar) inflows coming in from non-governmental organisations as well as tourism and agriculture sectors."
Market participants said they expect the shilling to trade in the 1,620-1,630 range over the coming sessions.
The central Bank of Tanzania said on its website it had traded $40.62 million on the interbank market over the past week.
The kwacha should remain volatile next week due to lingering concerns about instability that has rocked the market in the past few weeks.
At 1514 GMT on Thursday, commercial banks quoted the kwacha at 6.1200 per dollar, up from 6.4100 a week ago, as companies converted dollars to the local currency to meet an upcoming tax deadline.
"The kwacha remains susceptible to huge swings because the market is still jittery. It should trade between 6.000 and 6.250 next week," one commercial bank trader said.
Zambia's central bank hiked its benchmark interest rate by 175 basis points to 12 percent last week after a heavy selloff in the kwacha pushed it to an all-time low against the dollar. (Reporting by Kwasi Kpodo, Drazen Jorgic, Elias Biryabarema, Fumbuka Ng'wanakilala and Chris Mfula; Editing by Xola Potelwa and Susan Fenton)