Falling copper to weigh on kwacha
Johannesburg - The Zambian kwacha could come under pressure next week on lower copper prices, while in Ghana strong corporate demand for dollars is likely to keep the cedi near all-time lows.
The Zambian kwacha, the currency of Africa's top copper producer, is expected to soften next week after a weaker global economy pushed copper prices below $7,000 per tonne.
At 13:49 SA time on Thursday commercial banks quoted the kwacha at 5.3100, up from last week's close of 5.370 but traders said the gains were likely to be lost going into next week.
“We saw some kwacha gains due to dollar inflows from the mines but the gains are likely to be reversed by gloomy news about the world economy,” one trader said.
Three-month copper on the London Metal Exchange rebounded 1.25 percent to $6,880 a tonne by 11:43 SA time after sliding 3.7 percent on Wednesday, its weakest since October 2011 and biggest one-day loss in over a year.
Ghana's cedi could hold near its all-time low next week as dollar supplies in the interbank market dry up amid heavy corporate demand, traders said.
Traders quoted the cedi at an indicative 1.9730/65 at 14:30 SA time on Thursday, from Tuesday's close at 1.9735/65, after it touched fresh lows last week.
“Until we see some strong intervention from the central bank the demand pressure may persist in the coming weeks,” Sampson Akligoh of Databank said.
The currency of the gold, cocoa and oil exporting country has weakened 3.4 percent year-to-date, compared to 11 percent in the same period last year.
Uganda's shilling is forecast to firm in the coming days if the central bank leaves its benchmark lending rate unchanged on Friday as the market widely expects.
At 11:41 SA time commercial banks quoted the currency of east Africa's third-largest economy at 2,570/2,580, stronger than last Thursday's close of 2,595/2,605.
“The shilling will certainly draw positive sentiment if the central bank keeps its rate unchanged as the market suspects it will,” said Ahmed Kalule, trader at Bank of Africa.
“We're also still seeing ... the usual end-month inflows from NGOs (non-governmental organisations) in the pipeline.”
The Bank of Uganda is seen leaving its policy rate for May unchanged at 12 percent despite a fall in inflation last month.
Kenya's shilling should firm next week on subdued corporate dollar demand and expectations the central bank will leave its key lending rate unchanged.
“The shilling will gain purely on lack of demand for dollars from corporates,” said Peter Mutuku, head of trading at Bank of Africa.
The shilling was quoted at 83.65/85 per dollar at 14:00 SA time, in line with its close last Thursday. It is nearly 3 percent stronger so far this year.
“We expect the Central Bank of Kenya to keep its policy rate unchanged in the near term, “ said Melissa Verreynne of NKC Independent Economists, citing inflationary pressure from higher food prices, money supply growth and government spending.
Headline inflation inched up to 4.14 percent in the year to April, from 4.11 percent a month earlier.
Reduced demand for dollars as corporate clients stay out of the market should keep Tanzania's shilling stable next week.
Traders in Tanzania's commercial capital Dar es Salaam quoted the shilling at 1,630/1,633 to the dollar on Thursday, from 1,626/1,636 a week ago.
“Most corporate customers are shying away from the market, hoping that the local currency will appreciate in the near future,” said Hamis Mwakibete, head of trading at Commercial Bank of Africa Tanzania.
The Bank of Tanzania traded $23.55 million on the interbank foreign exchange market in the last week, it said on its website. A second trader said the central bank was intervening in the market to prevent the shilling from falling further.
“Many clients believe the shilling-dollar rate is currently on the higher side and are holding their demand until they get a more favourable rate,” the trader said.
Dollar sales by energy companies should push the naira lower against the greenback next week.
The currency of Africa's second biggest economy was flat at 157.90 at 12:22 SA time on Thursday, in line with Tuesday's close.
“Many currency dealers are trading cautiously today because of the expectation that NNPC (state-owned energy company) and some other oil firms will sell dollars any moment from now and this will have a positive impact on the naira,” one dealer said.
Many multinational oil exploration companies operating in Africa's top crude exporter sell dollars monthly to meet their domestic obligations. - Reuters