Uganda’s shilling is expected to come under pressure in the coming week as concerns over an Ebola outbreak weigh on tourism receipts and foreign-currency demand from the energy sector remains elevated, while other major African currencies are forecast to remain broadly stable, traders said.
Market participants said Uganda’s currency could weaken against the U.S. dollar as the country grapples with potential fallout from the health situation, which may discourage tourist arrivals and reduce inflows of foreign exchange.
Tourism is one of Uganda’s largest sources of foreign-currency earnings, making the sector particularly important for supporting the shilling.
“We think the Ebola situation is making some tourists rethink their travel plans, and that will impact dollar flows,” a Kampala-based trader told Reuters.
The shilling was quoted by commercial banks at 3,763/3,773 per dollar on Thursday, compared with 3,775/3,785 a week earlier. Despite the modest gain over the past week, traders expect renewed pressure as demand for dollars remains strong, particularly from companies involved in the energy sector amid elevated global oil prices.
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Across the region, Ghana’s cedi is expected to find support from continued intervention by the central bank, which has intensified its efforts to provide foreign currency to the market.
The cedi traded at about 11.72 to the dollar on Thursday, slightly weaker than 11.66 a week earlier, according to LSEG data.
The Bank of Ghana has recently increased both the size and frequency of its foreign-exchange auctions in a move aimed at easing demand pressures and stabilising the local currency.
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The central bank sold $160 million at a foreign-exchange auction on Tuesday and followed it with a further $300 million auction on Wednesday, reflecting authorities’ determination to support the market.
“While unmet foreign-exchange demand from local corporate accounts remains substantial, sustained intervention at these higher volumes is likely to slow the local unit’s recent depreciation,” said Andrews Akoto, Head of Trading at Absa Bank Ghana.
Analysts said continued dollar sales by the central bank could help prevent sharper losses in the cedi, although demand from importers and businesses remains significant.
In East Africa, Kenya’s shilling is forecast to remain largely stable as inflows from the Kenyan diaspora continue to offset demand for dollars from importers and businesses.
Commercial banks quoted the Kenyan currency at 129.25/35 per dollar on Thursday, virtually unchanged from 129.25/65 a week earlier.
Remittances from Kenyans living abroad have become one of the country’s most important sources of foreign exchange, helping cushion the local currency against external pressures and supporting foreign-reserve levels.
Nigeria’s naira is also expected to remain steady or strengthen slightly following increased foreign-currency sales by international oil companies operating in the country.
The naira traded at around 1,360 per dollar on the official market on Thursday, compared with 1,373 a week earlier, extending a recent period of relative stability.
On the parallel market, often referred to as the street market, the currency changed hands at approximately 1,393 per dollar.
Traders attributed the naira’s resilience to improved dollar liquidity, partly driven by foreign-exchange sales from international oil firms funding local operations.
“The naira has been appreciating. We expect stability next week or a further appreciation,” one market participant said.
Meanwhile, Zambia’s kwacha is expected to extend its recent gains, supported by robust inflows from copper exports.
The southern African nation, Africa’s second-largest copper producer after the Democratic Republic of Congo, has benefited from strong export earnings as demand for the metal remains firm.
Commercial banks quoted the kwacha at 17.92 per dollar on Thursday, a significant improvement from 18.69 a week earlier.
Analysts said continued hard-currency inflows from the mining sector could help maintain the kwacha’s upward momentum in the near term.
Overall, traders expect African currency markets to remain influenced by domestic economic conditions, central bank interventions and commodity export revenues, with Uganda facing the greatest downside risks among the region’s major currencies in the week ahead.
