Kenya’s Central Bank Holds rate at 10.0 percent, Likely to Sell Dollars

NAIROBI (Capital Markets In Africa) – At its Monetary Policy Committee meeting this month, Kenya’s central bank held its rate at 10.0 percent. Its Monetary Policy Committee will next meet to set lending rates on Sept.18. While the currencies of Kenya, Nigeria and Tanzania are expected to hold steady, traders said Uganda’s shilling and Zambia’s kwacha are forecast to weaken against the dollar in the next week to Thursday, while Ghana’s cedi will firm.


Kenya’s shilling is expected to hold steady in the next week to Thursday, and traders said they anticipate the central bank to sell dollars to keep it from weakening further. Commercial banks quoted the shilling at 103.80/104.00 to the dollar, compared with last Thursday’s close of 103.85/95. “Bearing in mind central bank intervention… feel we should remain just around this level,” a trader at one commercial bank said.


The Ugandan shilling is forecast to weaken due to dollar demand from the energy sector.

Commercial banks quoted the shilling at 3,600/3,610, weaker than last Thursday’s close of 3,595/3,605. “I think we’ll see significant activity by energy importers and others like manufacturers on the demand side,” said a trader at a leading commercial bank.


The kwacha may come under pressure next week due to reduced supply of dollars as month end flows triggered by salary payments and other obligations dry out. Commercial banks quoted the currency of Africa’s number two copper producer at 8.8500 per dollar from a close of 8.8000 a week ago.  “The kwacha is expected to trade in a tight band in the days to come with a weak bias on the back of lower supply for dollars,” Zambia National Commercial Bank said in a note.


The Tanzanian shilling will hold steady, helped by dollar inflows from the mining sector and month-end sales of greenbacks by companies to pay taxes and salaries in local currency.  Commercial banks quoted the shilling at 2,234/2,244 to the dollar on Thursday, barely moved from 2,235/2,245 a week ago. “The outlook for the shilling next week is that of continued stability. There is demand for dollars from energy and construction sectors, but this is being offset by inflows from mining companies,” said a trader at CRDB Bank.


The naira is forecast to trade in a narrow range in the coming days, and is expected to get support due to dollar inflows from central banks and offshore investors. The local currency was quoted at 364 to the dollar on the black market on Thursday, slightly firmer than 368 last week. On the official interbank market the naira has stuck around 305.90 to the dollar since August 2016. On the investor forex window the local currency was quoted at 367 to the dollar.


The cedi is expected to firm, lifted by dollar inflows from investors interested in buying a five-year Treasury bond, helped by renewed investor confidence after the central bank cut its policy rate this week. The local unit recovered this week after losses in mid July triggered by comments by President Nana Akufo-Addo that Ghana will not extend its $918 million IMF aid deal beyond April 2018. It was trading at 4.4050 to the dollar by mid-day on Thursday compared to 4.4200 a week ago.

“The cut in the monetary policy rate is one of the manifestations of an improving macroeconomic environment;  a major driver of investor confidence,” analyst Joseph Biggles Amponsah of Accra-based Dortis Research said.

 Reuters News: Reporting by George Obulutsa, Chris Mfula, Elias Biryabarema, Oludare Mayowa, Kwasi Kpodo and Fumbuka Ng’wanakilala; Compiled by George Obulutsa, editing by Pritha Sarkar

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