(Adds Nigeria, Tanzania)
NAIROBI, Dec 17 (Reuters) - Kenyan, Ugandan and Ghanaian currencies are expected to remain steady next week, with traders in Uganda and Ghana watching out for the impact of the U.S interest rate hike.
Nigeria’s is expected to weaken as foreign exchange reserves dwindle. Tanzania’s is expected to strengthen.
The Kenyan shilling is expected to trade in a tight range next week, with the prospect of central bank intervention keeping a lid on any depreciation by the local currency.
The shilling was trading at 102.40/50 on Thursday afternoon, weaker then last Thursday’s close of 101.80/101.90.
Nairobi-based traders say the local currency was likely to be stuck in the 102.00-102.50 range, with the central bank expected to defend the 102.50 level, as it has done several times in the past, by selling dollars.
The Ugandan shilling is forecast to be range-bound as dollar demand tails off before holidays, but the U.S. interest rate increase may feed a slight weakening bias.
Commercial Banks quoted the shilling at 3,390/3,400, weaker than last Thursday’s close of 3,365/3,375.
“Corporate demand will largely remain absent because firms are closing books for the year. However, I expect some residual fears from U.S. interest rate decision ... those fears could cause some marginal weakening,” said a trader from a leading commercial bank.
Nigerian naira is expected to be volatile next week. The central bank continues to ration dollar sales to both official interbank and the parallel market as its foreign exchange reserves decline.
The naira weakened to a new low of 272 to the dollar on the parallel market on Thursday compared with 253 a dollar last week. The naira was trading at 198.50 to the dollar officially, close to where the currency has been pegged since February.
“We see more trouble for the naira going by the unwillingness of the central bank to increase dollar supply to the market,” a trader at one commercial bank said.
On Wednesday, the central bank cut to $10,000 the amount of dollars it sold to each of the 2,270 bureaux de change operators that participated in its weekly sale, down from the $30,000 each last week. That creates a dollar shortage and a weaker naira.
The Tanzanian shilling is expected to extend its rally against the dollar in the days ahead, helped by a slowdown in demand for the U.S. currency towards the end of the year. Commercial banks quoted the shilling at 2,153/2,163 to the dollar on Thursday, unchanged from a week ago.
“The shilling is expected to continue strengthening because of a slowdown in business activities at the end of the year. There is also strong demand for shillings for various purposes, including payment of taxes,” said Theopistar Mnale, a dealer at TIB Development Bank.
Ghana’s cedi is seen steady until year end as economic activity slows while businesses ponder the potential impact of Wednesday’s U.S. interest rate hike on the West African economy.
The local currency has been steady in the fourth quarter after slumping nearly 30 percent in the first half of the year. It was trading at 3.8250 to the greenback at 1125 GMT on Thursday, compared to 3.83 a week ago.
“In the week ahead, though demand pressure remains firm, the cedi is expected to extend its stability as traders watch to see where the greenback will trade,” said Joseph Biggles Amponsah, an analyst at the Accra-based Dortis Research.
The kwacha is likely to be under pressure as investors shift from risky emerging market assets following the Fed interest rate increase.
At 0714 GMT, commercial banks quoted the currency of Africa’s No. 2 copper producer at 10.8880 from 10.9300 at which it closed a week ago.
“There will be movement of money from investments in emerging markets, so there will be pressure on the local economy and the kwacha,” said Charles Mudiwa, the chief executive of the Zambian branch of South Africa’s Standard Bank, Stanbic Bank. (Reporting by Chris Mfula, Elias Biryabarema, Drazen Jorgic, Fumbuka Ng‘wanakilala, Oludare Mayowa and Kwasi Kpodo; Editing by George Obulutsa, Larry King)