Currency Forecast: Kenyan, Nigerian, and Zambian Currencies Under Pressure

Kenya, Nigeria, and Zambia’s currencies are expected to weaken due to market factors like dividend payments and heightened demand for dollars. In contrast, Ghana’s cedi shows stability with central bank support, and Uganda’s shilling may strengthen with upcoming tax payments. Zambia’s kwacha faces pressures from limited supply and increased imports.

The currencies of Kenya, Nigeria, and Zambia are projected to face downward pressure over the upcoming week, while Ghana’s currency is expected to remain stable, and Uganda’s shilling could potentially appreciate against the dollar. This assessment is based on trader insights regarding market dynamics and central bank actions in these regions.

In Kenya, the shilling is anticipated to weaken due to banks paying dividends from the previous year. Current trading data indicates the shilling is valued at approximately 129.30/129.50 to the U.S. dollar, reflecting a decline from the previous week. A trader noted that as banks disclose their results, there will be increased dollar purchases for dividend repatriation, which may pressure the shilling further without central bank intervention.

Nigeria’s naira is expected to depreciate in both official and parallel markets, driven by a surge in foreign currency demand that exceeds central bank supply. As of Thursday, the naira was trading around 1,550 to the dollar, an increase from 1,520 naira last week, with street trading observing rates around 1,570 naira per dollar. Traders indicated that despite central bank measures, rising dollar demand has disrupted stability, with expectations of further rate drops unless supply improves.

Conversely, Ghana’s cedi is projected to maintain stability, supported by robust central bank interventions. The cedi traded at 15.45 to the dollar on Thursday, unchanged from the previous week, showcasing a balance between demand and supply. Traders express confidence in continued central bank support, predicting that the cedi will remain stable in the near future.

In Uganda, the shilling is likely to gain strength as businesses prepare for mid-month tax payments. It is currently quoted at 3,662/3,672 against the dollar, showing slight appreciation compared to the previous week. One trader suggested that the demand for dollars will lessen as companies fulfill their tax obligations, potentially allowing the shilling to trade between 3,630 and 3,660.

Zambia’s kwacha is expected to remain under pressure due to increased demand for foreign currency and limited availability. The kwacha was valued at 28.58 on Thursday, down from 28.70 a week prior. Analysts from Access Bank noted that while currency conversions may not significantly bolster the kwacha, they might help decelerate its depreciation amid rising import costs for food and electricity, affecting the local economy.

In summary, the currencies of Kenya, Nigeria, and Zambia are likely to experience depreciation due to various market pressures, including dividend repatriation, heightened dollar demand, and limited central bank supply. Conversely, Ghana’s cedi demonstrates stability supported by market equilibrium, while Uganda’s shilling may appreciate thanks to mid-month tax activities. Zambia’s kwacha faces challenges from a tightening currency supply environment. The overall outlook suggests careful monitoring of these currencies in the coming weeks.

Original Source: www.tradingview.com