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WEEKAHEAD-AFRICA-FX-African currencies seen under pressure from the dollar

Credit: REUTERS/AFOLABI SOTUNDE

The Nigerian naira and Kenyan shilling are expected to remain under pressure from the dollar in the week ahead mainly due to lower export earnings caused by coronavirus-related disruptions.

NAIROBI, April 2 (Reuters) - The Nigerian naira and Kenyan shilling are expected to remain under pressure from the dollar in the week ahead mainly due to lower export earnings caused by coronavirus-related disruptions.

NIGERIA

The Nigerian naira NGN=D1 is likely to weaken next week as banks struggle to fill dollar orders by importers seeking to meet past due obligations in the face of lower hard currency earnings, traders said.

The naira has been weakening across the official and black markets since last month after the price of oil collapsed, prompting the central bank to devalue the currency and suspend foreign exchange sales to retail currency traders.

The naira eased to 387.30 per dollar on Thursday after it touched a new low of 387.70. The currency was quoted at 415 naira per dollar on the black market, much weaker than the spot market rate.

Foreign currency inflows into Africa's biggest economy dried up after oil prices plunged as the coronavirus outbreak worsened an already tight currency market.

KENYA

The Kenyan shilling KES= is expected to remain under pressure from the dollar due to lack of foreign currency inflows from tourism and farm exports caused by the coronavirus outbreak, traders said.

Commercial banks quoted the shilling at 105.75/95 per dollar, compared with 105.00/20 at last Thursday's close.

"Diaspora remittances are being affected by the lockdowns in Europe and America, that's a source of dollar supply that has been reduced," said a senior trader from one commercial bank, referring to cash sent home by Kenyans abroad.

UGANDA

The Ugandan shilling UGX= is expected to be stable in the week ahead as the central bank moves to tighten liquidity in the money market, traders said.

At 0943 GMT, commercial banks quoted the shilling at 3,785/3,795 per dollar, compared with last Thursday's close of 3,820/3,830.

A trader at a leading commercial bank said they anticipated the local unit would trade in a narrow range around 3,790 per dollar as liquidity tightens.

"The mop-up will offer some support," the trader said, adding that demand was expected to remain mostly subdued amid limited economic activity, offering extra support to the local unit.

The central bank on Thursday removed an undisclosed amount of cash via a repurchase agreement and a deposit auction.

ZAMBIA

The kwacha ZMW= is expected to remain under pressure next week as market participants continue buying hard currency to cover their dollar shortfalls.

On Thursday, commercial banks quoted the currency of Africa's second-largest copper producer at 18.5700 per dollar, down from a close of 17.8300 a week ago.

"If the past ten days are anything to go by, we could see trades past 18.70," the Zambian branch of South Africa's First National Bank (FNB) said in a note, referring to a string of kwacha losses.

(Reporting by Chijioke Ohuocha, John Ndiso, Elias Biryabarema and Chris Mfula; Compiled by Duncan Miriri; editing by Ken Ferris)

((duncan.miriri@thomsonreuters.com; Tel: +254 20 4991239; Reuters Messaging: duncan.miriri.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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