NAIROBI, December 29 (Reuters) – The Nigerian, Kenyan, Zambian and Ugandan currencies are expected to weaken in the week to Thursday, due to record demand for dollars at the start of the new year.
The Nigerian Naira NGN= is seen weakening in the official market after the currency fell to a record low due to a backlog of currency demand, traders said.
The currency eased into a new band between 460 naira and 462 naira to the dollar on Thursday, weaker than last week’s range between 455 naira and 457 naira in the official market.
“The rate is weakening and I think it will weaken further by the end of the year,” said a local bank trader.
“It should reach around 465 levels.”
Kenyan shilling KES= is expected to weaken due to increased demand for dollars from importers, especially oil companies.
Commercial banks quoted 123.20/40 to the dollar, down from 123.15/35 last Thursday. In Thursday morning trading, the shilling hit a new all-time low of 123.35/55 before recovering some of its losses, according to Refinitiv data.
“It’s still in the same direction…weakening,” said a trader at a commercial bank. “Oils (oil companies) will be back, they are the main buyers.”
The trader said he would also be on the lookout for central bank sell dollars, which could give the shilling some breathing room. The bank says it only intervenes in the market to smooth any volatility in either direction and has no preferred level for the shilling.
The kwacha ZMW= is expected to remain lower against the dollar next week due to a sustained increase in demand for the greenback, while supply remains minimal.
On Thursday, commercial banks quoted the currency of Africa’s second-largest copper producer at 18.1900 to the dollar, down from 18.0200 at the close of business a week ago.
“The kwacha should continue to follow a short-term bearish trajectory despite local investors’ anticipation for a change in trend”, Access Bank ACCESS.GH said in a note.
The Ugandan shilling UGX= is expected to weaken in the coming days, undermined by strong demand from commercial banks looking to bolster their hard currency positions heading into the new year.
As of 1020 GMT, commercial banks quoted the shilling at 3,750/3,760, down from 3,640/3,650 last Thursday.
“I expect a peak in demand (in dollars) that we normally see around this time,” said a trader at a commercial bank.
“Some banks that are short are covering their positions before the new year.”
(Reporting by Chijioke Ohuocha, George Obulutsa, Chris Mfula and Elias Biryabarema; Compiled by Hereward Holland; Editing by James Macharia Chege)
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