Explainer: African Currencies Face Uncertainty In The Global Market

African currencies, particularly the Zambian kwacha and the Kenyan shilling, are expected to face a decline against the US dollar in the coming week

Photo Credit: Inclusion Times

African currencies, particularly the Zambian kwacha and the Kenyan shilling, are expected to face a decline against the US dollar in the coming week, according to traders. However, the situation for Uganda’s shilling, Nigeria’s naira, and Ghana’s cedi is anticipated to remain relatively stable.

In the report by Reuters, the Kenyan shilling is grappling with increased demand for dollars from oil-retailing companies, along with cautious trading due to uncertainty over the budget and pending disbursement from the International Monetary Fund (IMF). The recent withdrawal of planned tax hikes by Kenyan President William Ruto could potentially impact the country’s compliance with IMF programme targets, leaving traders in a “wait and see” mode.

In contrast, Nigeria’s naira is projected to experience minimal change on both the official and parallel markets. Central bank governor Olayemi Cardoso has attributed this to the central bank’s efforts to enhance market transparency and communication, which have been credited with reducing market volatility.

Meanwhile, Ghana’s cedi, buoyed by improved liquidity on the interbank market, is expected to maintain its stability despite a continued rise in dollar supply and reduced intervention from the central bank. This insight comes from financial experts at Stanbic Bank Ghana and Absa Bank Ghana.

Conversely, Zambia’s kwacha is likely to remain under pressure due to strong demand for hard currency, while Uganda’s shilling is forecasted to trade around its current levels due to subdued hard-currency demand stemming from mid-month tax payments in the local currency.

The varying fortunes of these African currencies provide a snapshot of the complex dynamics at play in the global foreign exchange market. As traders and analysts closely monitor these developments, the weeks ahead will likely be marked by continued vigilance and strategic positioning in response to the shifting tides of the international currency landscape.