April 18, 2013 / 4:02 PM / 5 years ago

AFRICA FX WEEKAHEAD-Foreign investors to lift Kenyan shilling

NAIROBI, April 18 (Reuters) - The Kenyan shilling is expected to climb against the dollar next week due to hard currency inflows from overseas investors into government securities, which have attractive yields.


The Kenyan shilling is expected to strengthen further in coming days on the back of foreign investors buying government bonds to lock in high yields.

Traders said the shilling, which is 2.9 percent stronger so far this year, is poised to reach 83.20 to the dollar, a level it has not attained since May last year.

“Next week we’ve bonds on sale that might attract foreign investors due to high yields,” said John Muli, a trader at African Banking Corporation.

The central bank of Kenya is scheduled to auction five-year and 15-year Treasury bonds worth up to 25 billion shillings ($298.69 million) on April 24.

Debt yields rose in the run-up to the presidential election on March 4 as concerns that violence seen after the previous vote five years before would be repeated led investors to demand higher returns. They started edging down after the latest vote passed off peacefully.


The Ugandan shilling is expected to be stable against the dollar in the week ahead although high liquidity in the money markets could put it under mild pressure.

At 0929 GMT, commercial banks quoted the currency of east Africa’s third-largest economy at 2,575/2,585, weaker than last Thursday’s close of 2,550/2,560.

The central bank bought dollars over two sessions earlier this week, helping to halt a month-long climb by the shilling, which is still up by 4.5 percent against the U.S. currency in the year-to-date.

“Because of high shilling liquidity we might see commercial banks covering short positions, which might bend the shilling a little on the depreciation side,” said Ali Abbas, a trader at Crane Bank. “But overall the shilling is likely to remain in a stable position..., probably between 2,540-2,590 because underlying demand by private sector is weak.”


The Tanzanian shilling is expected to be stable to slightly firm against the dollar next week, helped by a liquidity squeeze in the money markets.

Currency traders in Dar es Salaam quoted the shilling at 1,626/1,636 against the dollar on Thursday, weaker than 1,622/1,627 a week ago.

Market participants said the shilling was likely to trade in a 1,620-1,630 range over the coming days. The Central Bank of Tanzania said on its website that it had traded $24.2 million on the interbank foreign exchange market over the past week.


Ghana’s cedi is expected to decline marginally against the dollar next week on rising greenback demand, traders said. The local unit, which declined marginally versus the greenback earlier in the week, fell to 1.975 on Thursday at 1300 GMT from the day’s open of 1.9505.


The Nigerian naira is projected to depreciate further next week as a dollar shortage continues in the face of strong demand from importers, traders said.

The local unit was trading at 158.78 to the dollar on the interbank market on Thursday, weaker than the 158.40 level it closed at the previous day. Traders said the local unit of Exxon Mobil sold $25 million to some lenders on Thursday, but it was not sufficient to calm the market.

Nigeria’s central bank sold a total of $498 million at its two foreign exchange auctions this week. But dealers said some importers whose bids are not eligible for the official window patronise the interbank, driving up demand for the dollars.


The Zambian kwacha is likely to be under pressure from the dollar next week due to falling copper prices and slow global economic recovery, prompting investors to move away from risky emerging market currencies. At 1143 GMT, commercial banks quoted the currency of Africa’s top copper producer at 5.345 from 5.355 per dollar a week ago.

Reporting by Kevin Mwanza, Fumbuka Ng'wanakilala, Elias Biryabarema, Chris Mfula, Oludare Mayowa; Editing by Duncan Miriri and Mark Heinrich

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