AFRICA FX WEEKAHEAD-Treasury auction could lift Ugandan shilling

NAIROBI, March 13 (Reuters) - Expected strong demand for a Treasury auction could help the Ugandan shilling strengthen in the coming week, despite threats of further aid cuts by Western governments outraged by a harsh new anti-homosexuality law.

Ghana's cedi remains vulnerable due to unmet dollar demand.


Ghana's cedi could hit fresh record lows next week on persistent unmet dollar demand by local firms for their imports, analysts said.

The cedi weakened by more than 20 percent against the dollar last year and has lost another 10 percent since January as investor confidence has been undermined by concerns about economic policy and the government's ability to control inflation.

It was quoted in the 2.5600-2.5700 range at 1115 GMT on Thursday.

"The volatilities still remain and we expect the cedi to move to fresh lows in the coming sessions as the market continues to hold high volumes of unmet bids," said Yaw Adu-Koranteng, analyst at Accra-based NDK Asset Management firm.

A trader at one of the leading banks projected that the cedi could weaken to levels around 2.6200 next week.

Data on Wednesday showed that Ghana's consumer inflation rate increased to 14.0 percent in January, the highest since March 2010.


The Kenyan shilling is expected to be steady as tightening shilling liquidity due to corporate tax payments balances with inflows from maturing government securities.

At 1037 GMT on Thursday, commercial banks quoted the shilling at 86.40/50 to the dollar, compared with last Thursday's close of 86.45/55.

"We have huge tax payments coming through and so if the central bank continues mopping up excess liquidity and the tax payments go through, then the markets will become a bit tighter, but not like they were before," a senior trader at a commercial bank said.

"This is because of the maturities that we have this month. They are heavier than last month."

Traders said they expected the shilling to trade in the 86.20 to 86.70 range in coming days.


The Ugandan shilling is expected to strengthen, underpinned by weak dollar demand from corporates and possible inflows from foreign investors participating in a Treasury auction.

At 0944 GMT commercial banks quoted the shilling at 2507/2517 to the dollar, stronger than last Thursday's close of 2,510/2,515.

The shilling is up 0.5 percent to the dollar this year, but Western aid cuts in retaliation to the enactment of a harsh new anti-homosexuality law has clouded its outlook.

Faisal Bukenya, head of market making at Barclays Bank, said low dollar demand would help the shilling, while the Treasury auction could "bring in inflows" to give it some support.

Bank of Uganda is planning to sell a total of 165 billion shillings ($65.55 million) worth of Treasury bills of all maturities and the notes are seen attracting good demand after yields rose across all tenors at the last sale on March 5.


The kwacha is expected to appreciate within a narrow range next week due to continued central bank intervention to shore up the currency.

The kwacha touched 6.0050 per dollar at 0912 GMT on Thursday, almost matching last week's low of 6.0500, but it recovered to 5.9850 by 1213 GMT after central bank governor Michael Gondwe said the bank would continue to intervene in the market to mitigate volatility.

The Bank of Zambia attributed the kwacha's fall to the declining price of copper, one of the southern African country's key exports, and to foreign investors pulling out because of concerns about the impact of eventual monetary tightening by the U.S. Federal Reserve.

The central bank hiked the statutory reserve rate for commercial banks to 14 percent from 8 percent from March 10 to reduce liquidity.

It also increased its benchmark interest rate by 50 basis points to 10.25 percent last week, saying inflationary pressures remained high.


The Nigerian naira is seen trading within a narrow band against the dollar next week as the market depends heavily on dollar flows from central bank intervention for liquidity.

At 1230 GMT on Thursday, the currency was trading around 164.85 to the dollar on the interbank market, weaker than its close last week at 164.55.

The naira has been trading at around 164-165 to the U.S. currency in the last week, supported by direct intervention from the central bank.

It recovered from as low as 169 last month, when the government shocked financial markets by suspending respected central bank governor Lamido Sanusi.

Traders said that though demand for the dollar seems to have slowed after the initial shock of Sanusi's suspension, the naira will remain rangebound at around 164.50-165.20 next week, supported by central bank intervention.

"We expect the central bank to sustain its support for the naira in the coming days and this should keep the naira within a range around the 165 naira to the dollar," one dealer said.


The Tanzanian shilling is expected to strengthen slightly against the dollar in the coming days, helped by month-end sales of U.S. currency.

Commercial banks in east Africa's second-biggest economy quoted the shilling at 1,632/1,637 to the dollar on Thursday, little changed from 1,633/1,637 a week ago.

"Our expectations are that the shilling will slightly appreciate towards the month-end as corporate entities and NGOs will be offloading dollars for shilling-denominated payments," said Sameer Remtulla, a dealer at Commercial Bank of Africa Tanzania.

"The market is a little quiet at the moment, but we expect the shilling to be a bit scarce in the days ahead."

Market participants said they expect the shilling to trade in a tight 1,630-1,633 range over the coming days.

The central bank, the Bank of Tanzania, said on its website that it had traded $45.3 million on the interbank foreign exchange market over the past week.

(Reporting by George Obulutsa, Elias Biryabarema, Kwasi Kpod, Fumbuka Ng'wanakilala, Oludare Mayowa; Editing by Drazen Jorgic and Susan Fenton)