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Dollar flows may raise naira next week

By on September 27, 2014

The naira is likely to be supported by dollar flows from energy companies and intervention from the Central Bank of Nigeria next week.

The naira on Thursday traded around N163.65 to the dollar, down slightly from Wednesday’s close at N162.65, but firmer than N164.25 last week.

The naira has fallen sharply over the past two weeks, dragged down by lower global oil prices and reduced offshore flows into the debt and equity markets, according toReuters.

Dealers said the central bank had sold dollars directly to some lenders to try and prop up the naira.

“We are expecting increased dollar sales from some energy companies in the days ahead and hopefully, this will provide some support for the naira,” one dealer said.

African currencies are likely to hold their ground against the dollar next week, although Kenya’s shilling could stay under pressure after hitting near three-year lows last week.

Reuters reported that traders as saying that limited dollar flows would keep the shilling on the ropes, although this should ease off gradually with waning demand for the United States currency from importers.

On Thursday, commercial banks quoted the shilling at 89.20/30 to the dollar compared with 88.90/89.00 last week.

“The shilling will be under pressure, but I think if there is any weakness it will be gradual. I don’t expect it to slide aggressively as we saw (last week),” a senior trader at one commercial bank said.

The shilling has come off a trough of 89.45/89.55 reached last week, its weakest since December 2011.

Tanzania’s shilling is likely to strengthen in coming days, with third-quarter tax payments seen capping dollar demand while inflows from the tourism sector should boost supply, traders said.

Commercial banks in east Africa’s second-biggest economy quoted the shilling at 1,673/1,680 to the dollar on Thursday, weaker than 1,665/1,675 a week ago.

Zambia’s kwacha is expected to remain stable against the dollar, also supported by a Treasury bill auction likely to attract foreign investors.

On Thursday, commercial banks quoted the currency of Africa’s second-biggest copper producer at 6.1850/dollar from 6.1750 last week.

 

 

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