LAGOS, May 26 (Reuters) - Uncertainty surrounds trade on the Nigerian currency after the central bank announced plans for a flexible foreign exchange policy, while the Zambian kwacha will likely weaken as foreign currency flows are reduced.
Nigeria’s naira is expected to trade cautiously in as currency traders and investors await clarity from the central bank on its latest foreign exchange policy.
The local currency weakened to 360 against the dollar on the parallel market on Thursday, from 342 a dollar last week, but continued to trade around the peg rate of 197 to the dollar on the official interbank market.
On Tuesday, the central bank said it would adopt a flexible exchange rate policy, a shift from a peg for the naira seen as over valued, which had hampered investment. The bank has only said it will give guidance within days.
“We are waiting for clarity on the new policy and until the central bank comes up with modalities for the flexible foreign exchange market, the market will be trading cautiously,” one dealer said.
The kwacha is expected to remain on the back foot as reduced foreign exchange flows into Africa’s second-largest copper producer restrict supply.
At 1324 GMT on Thursday, commercial banks quoted the kwacha at 10.3100 from 10.2400 a week ago.
“We are likely to see a slowdown in corporate dollar selling early next week after the month end and that will put pressure on the kwacha,” one commercial bank trader said.
Ghana’s cedi is expected to remain under pressure due to growing dollar demand by corporate institutions and commerce operators without a matching supply, an analyst said.
The cedi, which has rallied to a year high this month on sustained forex inflows, began shedding the gains last week as multinational’s repatriated quarterly dividends abroad.
The dollar-cedi rate traded at 3.8800 at 1025 GMT on Thursday, down from 3.8375 a week ago.
“In the face of strong corporate demand and thin liquidity, the pair is set to break through the 3.9 levels and head towards the resistant 4.0 in the weeks that follow if we don’t see improved liquidity in the market,” analyst Joseph Biggles Amponsah of the Accra-based Dortis Research said.
The shilling is expected to hold steady, with dollar inflows from charities and agricultural exports seen matching importer demand, traders said.
At 0956 GMT, commercial banks quoted the shilling at 100.60/70 to the dollar from last Thursday’s close of 100.70/80.
“The shilling is expected to trade within the bound of 100.50-101.00 in the week to come due to well matched supply of dollars from charities and agricultural exports to demand from importers,” a trader at one commercial bank said.
The shilling is seen stable, helped by month-end inflows from mining companies and non-governmental organisations.
Commercial banks quoted the shilling at 2,187/2,197 to the dollar on Thursday, unchanged from a week ago.
“I don’t see the shilling crossing the 2,200 barrier next week. It will likely continue to trade in the same 2,180-2,190 levels thanks to expected month-end inflows,” said William Francis, a dealer at Commercial Bank of Africa Tanzania. (Reporting by Oludare Mayowa, Chris Mfula, Kwasi Kpodo, John Ndiso, Fumbuka Ng‘wanakilala; Compiled by Tanisha Heiberg; Editing by James Macharia)