African currencies week ahead: Zambia kwacha eyes mining royalty change, others stable


The Zambian kwacha could firm on news that the cabinet will propose changes to mining royalties in Africa’s second-largest copper producer, while other African currencies are seen stable.

ZAMBIA: News that Zambia’s cabinet will propose changes to mining royalties in the southern African nation on Monday could buoy the kwacha, analysts said.

At 0939 GMT, the kwacha traded at 7.4250 per dollar from a close of 7.6000 a week ago. The royalties were increased in January, leading to a dispute with foreign mining firms.

“A positive outcome for the mines will give the unit much-needed support,” the local unit of South Africa’s First National Bank said, adding that tight kwacha liquidity is also expected after a hike in the statutory reserve ratio.

NIGERIA: The naira will remain steady on the interbank market but could gain on the parallel market after firming sharply to 200 to the dollar from 226 a week ago following a peaceful general election in Africa’s biggest economy.

Traders say individuals who had stockpiled dollars to hedge against political risk fearing the election could be marred by violence were exchanging their funds for the naira in the parallel market.

The local currency was trading with the 199-199.50 level on the interbank market where it has been stuck since February, after the central bank pegged the rate.

“We don’t expect any major change in the coming with the existing restriction in the market,” another dealer said.

KENYA: Kenya’s shilling could trade in a range owing to tight liquidity, hovering between the 92.70 to 92.90 levels.

At 0847 GMT, commercial banks quoted the shilling at 92.75/85 to the dollar from 92.70/92.80 a week ago.

Traders said they expected liquidity to tighten due to demand for the shilling by investors in an infrastructure bond and companies paying local taxes, while banks will be preparing to meet the central bank’s cash reserve requirements.

But once liquidity starts flowing, the shilling will resume its weaker tone, a senior trader at one commercial bank said.

UGANDA: The shilling is seen stable after Uganda hiked its policy rate by 100 basis points to 12 percent.

A likely slowdown in corporate dollar demand as companies build up shilling positions to pay their local taxes could also keep the shilling steady, traders said.

At 0838 GMT commercial banks quoted the shilling at 2,970/2,980, stronger than last Thursday’s close of 3,000/3,010.

“I think we’re having a positive knee-jerk reaction for the shilling to the rate decision,” said Faisal Bukenya, head of market making at Barclays Bank.

TANZANIA: The Tanzanian shilling is expected to weaken due to demand for greenbacks from oil and manufacturing sectors after holding steady on month-end dollar inflows and slack dollar demand.

The shilling traded at 1,855/1,865 to the dollar on Thursday, unchanged from a week ago. Traders expected the shilling to trade in the 1,860-1,870 range next week.

The Bank of Tanzania said it had traded $23.45 million on the interbank foreign exchange market over the past week.

GHANA: The cedi is expected to remain stable on demand from businesses settling domestic bills and positive investor sentiments as the country begins a three-year deal with the International Monetary Fund.

The West African currency was trading at 3.8100 by 1030 GMT, compared to last Thursday’s close of 3.8150.

The IMF last Friday approved a $918 million assistance program for Ghana aimed at restoring economic stability and creating jobs, and said it would disburse $114.8 immediately, which would boost the country’s foreign exchange reserves.

This would help restore foreign exchange stability, Doris Aggrey Ahiati of the Accra-based Databank financial group said. –Reuters