Reuters: US Dollar Report: AFRICA FX WEEKAHEAD-Nigeria naira on back foot after 7-mth low

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AFRICA FX WEEKAHEAD-Nigeria naira on back foot after 7-mth low Mar 14th 2013, 15:51 JOHANNESBURG, March 14 | Thu Mar 14, 2013 11:51am EDT JOHANNESBURG, March 14 (Reuters) - Nigeria's is set to remain on the back foot next week after hitting a seven-month low against the dollar on Thursday as offshore investors sell local debt. Kenya's shilling is also expected to trade in a narrow band ahead of the outcome of a petition challenging the presidential election results. NIGERIA The naira eased to its weakest level against the dollar in more than seven months on Thursday after some offshore investors sold off their debt holdings on fears the local currency could lose further ground. The naira was trading at 159.65 to the dollar on the interbank market on Thursday, weaker than its 158.92 close the previous day. "The fear that the naira could hit 160 to the dollar in the near term is forcing many offshore investors to sell off their local debt holdings and repatriate their funds, putting the local currency under pressure," one dealer said. Nigeria has set 160 naira to the dollar as a benchmark for calculating its oil earnings in its 2013 budget, fuelling speculation in the market the central bank could shift its naira to dollar exchange rate band. The naira is expected to remain under strain unless there are significant dollar inflows from oil companies, another dealer said. ZAMBIA The kwacha is expected to soften next week due to a strengthening of the dollar against other currencies and its long-term prospects are bleak given waning offshore investor interest in Zambian assets. Commercial banks quoted the currency of Africa's top copper producer at 5.380 to the dollar on Thursday, down from 5.350 last week. "A breach of 5.400 looks very likely if the Bank of Zambia doesn't intervene," one trader said. Should major dollar sellers hold off in anticipation of a better rate, the weakening of the kwacha would be quick with a possibility of touching 5.420, he said. Jeff Gable, head of Africa research at Absa Capital, forecast the currency of Africa's top copper exporter to end the year at 6.000 to the dollar as some of the money earned by exporters is not being remitted back into the country. Offshore investors also appear to have turned their back on kwacha-denominated assets, he said, in particular government bonds. KENYA Kenya's shilling is expected to be rangebound against the dollar in the coming days as the market awaits the outcome of an election petition on last week's presidential vote. Importer demand for the greenback also remains subdued. Uhuru Kenyatta's victory in a close presidential race last week is to be contested in the Supreme Court by the runner-up, Raila Odinga, who alleges voting irregularities. "The days ahead remain hazy for the dollar/shilling currency pair as the dust from the recent general election is yet to settle fully in the face of a likely petition to challenge the presidential election results," said Commercial Bank of Africa in a daily note. The shilling was quoted at 85.35/55 to the dollar on Thursday, stronger than last Thursday's close of 86.20/40. It is expected to trade in the 85.20-85.80 range in coming sessions. The shilling has gained 1 percent since the presidential result was announced, lifted by a return of business confidence and reduced dollar demand by importers who had accumulated long positions in the run-up to the election. TANZANIA Tanzania's shilling is expected to hold steady against the dollar in the days ahead and could strengthen slightly due to expected greenback inflows from companies. Traders in Tanzania's commercial capital Dar es Salaam quoted the shilling at 1,625/1,630 to the dollar on Thursday, unchanged from a week ago. "We expect to see a little change in the shilling, with the possibility of the local currency strengthening a bit as corporate clients may look to offload their dollar positions for tax and salary obligations," said Hamisi Mwakibete, head of trading at Commercial Bank of Africa Tanzania. "We have seen the shilling trading on a very narrow band of 1,620-1,630 over the past one week and we expect this trend to continue as we approach both the month end and quarter end." The Bank of Tanzania said on Tuesday it traded $42.35 million on the interbank foreign exchange market over the week. UGANDA Uganda's shilling is forecast to trade in a narrow range against the dollar over the next week, though it could come under pressure from importer demand for the greenback following neighbourng Kenya's vote. Commercial banks in Kampala quoted the currency at 2,640/2,650 on Thursday, stronger 2,648/2,658 a week earlier. "There's expectation of some pockets of demand from importers in the days ahead now that we're past the Kenyan risk but it wont be much really," said David Bagambe, trader at Diamond Trust Bank. "The shilling is likely to play in the 2,640-2,670 range but the tone will tend more towards a weaker position because of that little demand that's likely to come into the market." Worries that Kenya's presidential elections would spawn violence as in 2007 faded after the poll went peacefully and traders say some importers will be buying large amounts of hard currency in the days ahead to make input orders they had postponed ahead of the vote. The shilling is up 1.7 percent against the dollar in the year to date and is set to be supported in the short term by the central bank's cautious monetary policy. GHANA Ghana's cedi could decline marginally against the dollar next week due to unmet greenback demand from local firms to settle their end of quarter imports. The cedi, which had been fairly stable since January, has suffered intermittent declines recently on high dollar demand. The local unit was trading at 1.9325/50 to the dollar at midday on Thursday after falling to 6-month lows on Wednesday as greenback demand outstripped supply. Nana Ama Boateng of Accra-based Databank Research group said persistent dollar demand might push down the local unit further next week to touch 1.9400. "The cedi is expected to see slight depreciation due to illiquidity in the market - next week could average 1.9350-1.9400," she said. Link this Share this Digg this Email Reprints

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