NAIROBI, July 11 (Reuters) - The Kenyan currency could come under renewed pressure after the central bank warned that instability in Egypt was a risk to the economy, while a shortage of dollars may weaken Nigeria’s Naira.
The Kenyan shilling may weaken further if the turmoil in Egypt hits tea exports from the east African country and pushes global crude prices higher.
The shilling has weakened 1.4 percent against the dollar since July 3 to the 87.05/25 at 0956 GMT, in line with other emerging market assets, on expectations that the U.S. Federal Reserve will start to unwind its stimulus.
“Egypt unrest is a big factor going forward, that could hit the shilling,” said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
Kenya’s central bank said, during a monetary policy meeting on Tuesday that left its key lending rate unchanged, the unrest could have repercussions on the oil price and tea exports, a big foreign exchange earner.
The Nigerian naira could depreciate next week on tightening dollar liquidity, after state-owned energy company NNPC sold fewer-than-expected dollars on Wednesday.
The naira rose after NNPC sold about $350 million to some lenders, but traders said the sum sold was below expectation and insufficient to meet surging demand for dollars.
“We see the naira depreciating to around 162 to the dollar in the near term as the market is not expecting any major dollar flow for now, unless the central bank intervene to provide some support for the naira,” one dealer said.
The central bank had resumed a forward foreign exchange auction to support the naira on Wednesday, but only one bank bought $560,000 - not enough to move the market.
The Ugandan shilling is expected to firm, lifted by inflows from commodity exports and slowing appetite for dollars after the U.S. Federal Reserve tempered expectations of winding down its stimulus programmes quickly.
Ahmed Kalule, trader at Bank of Africa, said the shilling’s relative weakness since mid last week was mainly due to investors exiting risky assets.
“In the next few days the market is likely to see some gains for the shilling as offshore demand (for dollars) wanes while some commodity export bring in some inflows,” he said.
Uganda’s main exports are coffee, cotton, fish, and tea.
A market note from Centenary Bank said the local currency was likely to swing in the 2,580/2,620 range.
The kwacha is expected to remain range bound against the dollar with a likelihood of posting marginal gains as corporates convert their dollars into kwacha to pay taxes.
At 0814 GMT on Thursday commercial banks quoted the kwacha at 4.455 per dollar from 5.480 a week ago.
The currency of Africa’s top copper producer was expected to appreciate in the medium term after the government introduced a law allowing the central bank to monitor foreign exchange flows, one commercial bank trader said.
Tanzania’s shilling is expected to strengthen slightly over the coming days due to a liquidity squeeze on the local currency at the start of the new government fiscal year 2013/14 (July-June).
Market participants said the shilling was expected to trade in a tight 1,620-1,628 range over the coming days.
“The market is squeezed on Tanzanian shillings, since most corporates are still winding up their positions due to the end of the government’s previous fiscal year on June 30 and the start of the new fiscal year on July 1,” said Hamisi Mwakibete, head of trading at Commercial Bank of Africa Tanzania. (Reporting by Kevin Mwanza, Fumbuka Ng‘wanakilala, Elias Biryabarema, Chris Mfula and Oludare Mayowa; Edting by Ron Askew)