Nigeria's naira is likely to gain next week due to strong dollar supplies from the oil industry, while Kenya's shilling looks set to extend this year's rally due to continued off-shore demand for high-yielding domestic debt.
The naira hit an eight-month high against the dollar on the interbank market on Thursday due to hefty foreign exchange supplies from oil companies and reduced demand from companies importing refined fuel.
The naira was trading at 156.05 to the dollar, firmer than Wednesday's close of 157.45.
Traders said it should extend its gains as more inflows arrived from units of oil multinationals and off-shore investors buying local debt.
"The naira is rapidly appreciating because of the consistent dollar inflows from off-shore investors interested in treasury bills and multinational oil companies offloading their month-end dollars," one dealer said.
Traders said banks had been unable to take long dollar position due to reductions in their foreign exchange Open Position Limit (OPL).
"We have to offload the excess dollar position above our OPL to the market and this has also contributed to the gain by the naira," another dealer said.
Dollar demand has fallen rapidly at the official window as a parliamentary probe into government fuel import subsidies has discouraged gasoline importers from buying dollars.
Parliament is investigating discrepancies in the amount of gasoline subsidy paid to importers against the actual amount brought into the country.
Dealers said most fuel importers had cut back on their forex demand since the investigation started in January.
Foreign appetite for Kenyan government debt, high money market rates and subdued corporate dollar demand are seen helping the shilling firm against the dollar.
Leading commercial banks posted the shilling at 82.65/85 against the dollar, firmer than last Thursday's close of 82.95/83.15.
If it broke through a recent 82.50 resistance level, the shilling could go on to target a year-high of 81.
"There are good inflows in the market as guys pay for bonds. Demand for dollars is also a bit slow since most orders from the energy sector are done," said Julius Kiriinya, a trader at African Banking corporation.
High yields on bonds, which rose most of last year due to rising inflation and aggressive monetary tightening in the final quarter of 2011, have bolstered offshore demand for the shilling.
The weighted average yield on Kenya's one-year Treasury bond fell to 18.030 percent from 21.082 percent in January, after the paper was 248 percent oversubscribed at Wednesday's auction.
They said high money market rates on the shilling, which saw the weighted average interbank rate rise to 21.6 percent on Wednesday from 20.8 percent on Tuesday, would also offer support.
"Overall the shilling will be supported by bond buyers and high interest rates in the money market," said Dickson Magecha, a trader at Standard Chartered Bank.
Tanzania's shilling is seen stable against the dollar, helped by a slowdown in greenback demand from importers and expected dollar inflows from corporates looking to meet month-end obligations.
Commercial banks in Dar es Salaam quoted the shilling at 1,590/1,600 to the dollar on Thursday, little-moved from 1,595/1,598 a week ago.
"The shilling should be stable next week. I don't see any deprecation or appreciation of the local currency," said Fred Siwali, a dealer at CRDB Bank.
"There is normal supply of dollars in the market, mostly from the central bank and we are not seeing a lot of huge demand at the moment."
Traders said the shilling was likely to trade in the 1,590-1,600 range in the coming days.
"However, we expect demand for dollars to start picking up after the first week of March when importers return to the market," said Patrick Kapella, chief dealer at First National Bank Tanzania.
The central Bank of Tanzania has been selling dollars in the market to support the shilling, trading $36.3 million on the interbank foreign exchange market in the week to Thursday.
The Uganda shilling is seen holding steady against the dollar, supported by inflows from aid agencies and reduced importer dollar demand, traders said.
The currency of east Africa's third largest economy has firmed 6 percent against the greenback this year and is 19 percent off its record low of 2,901 hit in September.
At 1126 GMT commercial banks in Kampala quoted it at 2,333/2,343, weaker than last Thursday's close of 2,320/2,330.
"We'll trade within recent ranges of 2,310-2,350. I don't envisage an uptick in demand from key sectors like oil and manufacturing," said a trader at a leading commercial bank.
"The little demand from these sectors could be evenly matched by the usual inflows from non-governmental organisations and other corporates that we see toward end-month."
Year-on-year inflation eased for a third consecutive month to 25.7 percent in January prompting the central bank to loosen monetary policy by cutting its key rate to 22 percent this month from 23 percent previously.
However, the easing cycle is expected to depress yields on government debt, dampening offshore appetite.
"We're already witnessing a drop in offshore interest in Uganda's debt but the market still has some limited flows that are sufficient to soak up demand," said Dickson Magecha, a dealer at Standard Chartered Bank in Nairobi.
The cedi is expected to hold firm against the dollar, although its fate will hinge on the level of offshore interest in a 3-year bond auction on Thursday open to foreigners, traders said.
The currency has been largely stable this week below a support level of 1.71 to the dollar, and climbed to 1.7050 in early trade.
Bigles Amponsah of Access Bank Ghana said it was likely to trade between 1.695-1.710.
Amponsah said Thursday's gains were due to expectations of a successful auction of the 200 million cedi bond which is being used to finance maturing debts and infrastructure.
"The local currency could record further gains before close of trading today. Its next movement would largely depend on information about today's auction, but only temporarily," Amponsah said.
Barclays Bank Ghana trader Jacob Bromley said good offshore take-up would bolster the cedi next week.
"It may potentially trade higher into next week if we see good offshore investor participation in today's auction," Brobbey said.