Naira may strengthen as US election lifts market sentiment

Nigeria’s naira is expected to strengthen against the US dollar in the coming week, supported by improving global investor sentiment following the United States midterm elections, currency traders have said.

The outlook comes as the naira traded at N1,346 per dollar on the official market on Thursday, compared with N1,349 a week earlier, according to a Reuters report.

In the parallel market, the currency exchanged at N1,400 per dollar.

A trader said the improved appetite for riskier assets in global markets could provide support for the Nigerian currency.

“I expect an appreciation on the naira considering what has happened in the US. Right now there is a bit of risk-on sentiment and that would be positive for our own market,” the trader said.

The naira’s projected appreciation forms part of a broader positive outlook for African currencies, with Uganda’s shilling also expected to strengthen against the dollar in the coming week.

Uganda’s currency has recovered some ground after the central bank raised its benchmark interest rate in an emergency move to arrest its decline.

Commercial banks quoted the shilling at 4,040 to 4,050 per dollar on Thursday, compared with 4,345 to 4,355 a week earlier.

Traders expect the Ugandan central bank to announce another rate increase at its November 9 monetary policy meeting, although at a lower magnitude.

“We anticipate another hike but of a lower magnitude, so that sentiment or expectation and also the fact that liquidity is really scarce will boost the shilling,” a trader said.

Meanwhile, Ghana’s cedi and Kenya’s shilling are expected to remain relatively stable, while Zambia’s kwacha faces further pressure from demand for foreign currency to finance energy and agricultural imports.

The cedi traded at 11.67 per dollar, compared with 11.63 a week earlier, while Kenya’s shilling was quoted at 129.85 to 130.05 per dollar.
Zambia’s kwacha weakened to 20.62 per dollar from 20.55 a week earlier.