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Slow dollar demand to raise naira, other currencies

By on July 29, 2014

The summer holiday is expected to slow demand for the dollar, allowing the naira to gain some ground this week, while the usual month-end buying of local currencies is expected to buoy African units in general.

The naira is seen gradually appreciating against the dollar this week as energy companies operating in the country buy local currency to meet domestic obligations, while a summer holiday lull also supports the unit.

“This is the summer period and we expect demand for the dollar to be slow for a while because most buyers of forex have gone on holiday and there is little taking place,” one dealer said.

According to Reuters, the naira has hovered around the 161.45-162.20 range in the last two weeks, supported by increased dollar flows from oil multinationals and offshore investors buying local debt.

Energy companies operating in Nigeria sell dollars at the end of the month to meet domestic obligations.

Zambia’s central bank tightened monetary policy last month, halting a five-month decline in the kwacha, which has since rallied from a record low of 7.25 to the dollar in late May to around 6.11 last week.

The Ugandan shilling should hold steady or firm in the next week because of subdued corporate demand for dollars and the typical end-of-month inflows of dollars from non-governmental organisations paying wages in shilling.

Also, the Tanzanian shilling is expected to strengthen slightly next week due to month-end inflows from companies and slowing demand for the US currency from oil and manufacturing firms.

The Kenyan shilling is expected to weaken next week as energy firms seek dollars to import fuel and other products.

 

 

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