The Ugandan shilling is seen strengthening against the dollar next week, with a Treasury bill auction likely to draw in offshore dollar inflows, while a local currency liquidity squeeze in Tanzania is expected to support its shilling.
Uganda's shilling is expected to firm in the next week, helped by dollar flows from offshore investors seeking to buy Treasury bills in an auction in which some traders expect yields to rise.
Next week, the Bank of Uganda (BoU) is due to sell Treasury bills of various maturities worth 120 billion shillings ($47.81 million) and some analysts expect rates to inch up, helped by a pause in monetary policy easing.
After trimming its key rate in February and March, BoU hit the brakes on its monetary policy easing cycle this month, maintaining the rate at 21 percent.
Commercial banks in Kampala quoted the currency of Africa's largest coffee exporter against the dollar at 2,505/2,515, from last Thursday's 2,575/2,585.
"The next biggest factor that we're watching is the auction," said Lucas Ochieng, head of treasury at Orient Bank.
"If rates turn up as I anticipate we're likely to see some improvement in inflows and some modest support for the shilling."
Analysts say the policy rate pause will help the shilling to recover this month, after a surprise rate cut and a slump in debt yields caused it to plunge to its 2012 low of 2,620 on March 6.
The central bank is eager to keep Uganda's debt attractive to maintain a flow of dollars from offshore investors, a key prop of the local currency in a country with a weak export base.
"I see the rates holding steady at the current levels because they're already fairly attractive as an entry point for offshore guys," said Charles Katongole, a trader at Standard Chartered Bank Uganda.
Tanzania's shilling is expected to gain against the dollar, lifted by a local currency liquidity squeeze and a slowdown in demand for the greenback.
Commercial banks quoted the shilling at 1,580/1,587 to the dollar on Thursday, from 1,578/1,583 a week ago.
"Next week, we anticipate that the shilling will continue to appreciate by 2 or 3 shillings," said Sameer Remtulla, a trader at Commercial Bank of Africa Tanzania. "The reason for the appreciation is that the shilling is very tight and players have been offloading dollars to get the local currency."
"There is a little bit of demand for dollars from oil companies, but most people are struggling for shillings at the moment."
Traders said the local currency will likely trade in the 1,570-1,580 range in the days ahead.
"I think the shilling might continue to strengthen because we are heading towards the end of the month and some customers will be aggressively selling dollars to get shillings," said Barton Hamisi, a trader at National Bank of Commerce, a unit of South Africa's ABSA.
"There is not much activity in the market and we don't see any fundamentals to significantly move the market. The central bank is very keen to see the shilling trading at current levels."
The Bank of Tanzania said on its website it traded $29.8 million on the interbank forex market in the last week.
Kenya's shilling is seen supported in the coming days as the central bank continues to soak up liquidity to stabilise the interbank rate, despite importers buying dollars on bets that the local currency could slip.
The central bank has mopped up 24.6 billion shillings ($295.3 million) though repurchase agreements in four straight sessions as it sought to stabilise the interbank rate that plunged 11 percentage points to 10.3 percent on April 5.
The rate has since risen to 12.5 percent due to liquidity tightening, traders said.
"The shilling will be stuck in a range for now if the central bank keeps mopping up liquidity," said Sameer Lagadia, head of trading at Diamond Trust Bank.
At 1015 GMT, commercial banks quoted the shilling at 83.25/45 per dollar, weaker than last Thursday's close of 83.05/25, but within the recent range of 83.00-83.50.
Traders said they expected the shilling to trend back toward the 83.00/20 level as inflows from foreign investors buying government bonds trickle into the markets.
Yields on government paper have continued to edged down in oversubscribed sales, as investors track down inflation that fell to 15.6 percent in March, leading the central bank to hold its benchmark rate steady for a fourth straight month in April.
The shilling has gained 2.1 percent against the dollar this year, and is off a record low of 107 per dollar hit in October, partly aided by offshore interest in Kenya's debt and the central bank's adoption of a hawkish stance late last year.
"I see the shilling going back to 83.00/83.20 a dollar next week. From the recent central bank's maneuvers it seems there's where they want it," said a trader at one commercial bank.
Ghana's cedi could stabilise next week against the dollar on expected central bank intervention, including a possible policy rate hike, traders said on Thursday.
The local currency consistently declined throughout this week with the dollar-cedi rate edging closer to a key 1.8000 resistance level on strong demand for the greenback from local firms.
After opening Thursday's trading session at 1.7955/80, the rate rose to 1.7970/95 at 1300 GMT.
Traders said although the central bank had been selling dollars to the interbank market, the volumes were not enough to meet the rising demand.
The bank's monetary policy committee is expected to announce a rates decision on Friday and many traders said they expect a hike of at least 50 basis points from the current 13.5 percent.
Biggles Amponsah of Access Bank, Ghana, projected that the dollar-cedi rate could slow next week within the 1.79 band without crossing the 1.8000 barrier.
"Next week, I don't expect the rate to continue the way we've seen it move this week," he said.
Amponsah said he believed the high demand for the dollar for much of February and March was triggered by uncertainty.
"This is the first time in two-and-half years that I have experienced this type of consistent high demand in the market - people are just buying to hedge," he said.
"It also means that people have brought forward their future demand and a time will come (when) they will not buy anymore and again it means that going forward we should not see any further depreciation," Amponsah added.
Other traders believed the direction of the dollar-cedi rate next week would depend on the central bank's decision on Friday.
"The outcome of the MPC will be key in determining the direction of the currency next week," Barclays Bank trader Jacob Brobbey said.
The Nigerian naira could depreciate further next week due to a resurgence in demand for the greenback, though a month-end dollar sale by state-owned energy firm NNPC could take some pressure off the local currency.
At 1042 GMT, commercial banks quoted the local currency at 157.55 to the dollar on the interbank market, weaker than Wednesday's close of 157.40.
"The market is only waiting for the NNPC dollar sales to help take out some of the growing demand, otherwise the naira will slide further in the coming days," one dealer said.
The naira had managed to trade within the 157.40-157.90 band in the past two weeks due to dollar supplies by energy companies and offshore investors participating in Treasury bill auctions.
The local currency rose to 157.40 against the dollar on Wednesday, from 157.50 the previous day, after oil firms sold around $186 million to some lenders.