The naira is expected to lose more ground this week, hit by the slide in crude oil prices and a decline in dollar sales by oil companies operating in the country.
Wider risk aversion to emerging markets in general is seen keeping other currencies on the backfoot as well.
Reuters reports that the naira is seen trading lower this week, around the 183 level that it fell to on Friday, as sharp decline in oil prices continues to affect the economy.
The naira traded around the 178 – 182 range against the dollar in volatile trading sessions last week, with dollar sales from oil companies being its only life line, as United States crude oil plumbed a-five-and- a-half-year low of $46.83 on Wednesday.
Now that these sales have dried up, it could test the lower end of that range, dealers said.
The naira is trading well outside the Central Bank of Nigeria’s 160-176 target range since the devaluation of November 25.
“Last week there were a lot of oil company sales which put a large chunk of dollars through the market. This week, we are not expecting that,” one dealer said, adding that, “the central bank may intervene, but I’m not sure how successful that will be.”
Much will depend on volume. If the central bank only sells a couple of million dollars here and there, dealers say, it will give little support. If it uses substantial reserves, the naira could find support above 180, they say.
The Kenyan shilling is expected to weaken this week as investors shun risky assets in favour of the dollar, which has been rising against other currencies.
The shilling traded at 91.05/15 per dollar on Friday, barely moved from the previous day’s close of 91.10/20.
“The shilling’s fortunes are heavily dependent on dollar global trends. We will probably see the 92.00 level trade soon,” a trader at National Bank, Chris Muiga, said.
He said the central bank was likely to let the currency weaken, calculating that the slump in the price of crude oil in global markets meant there were no serious risks to inflation.
The Tanzanian shilling is also expected to ease slightly against the dollar this week, weighed down by demand from importers, unless the central bank steps in.
Commercial banks in East Africa’s second-biggest economy quoted the shilling at 1,740/1,750 against the dollar on Friday, unchanged from the previous day, but slightly weaker compared to a week ago.
“The shilling will probably continue to weaken this week. The market is a bit volatile at the moment and we are not seeing any inflows of the US currency,” a trader at TIB Development Bank, Flora Mrema, said.
“The market is unpredictable, but we think the shilling will likely come under more pressure against the dollar next week.”
Market participants expected the shilling to trade in a tight 1,740-1,750 range over the coming days.
The Bank of Tanzania said on its website it had traded $36.6m on the interbank foreign exchange market over the past week.