NAIROBI, May 7 (Reuters) - The Kenya and Tanzania shillings firmed against the U.S. dollar in the week to Wednesday, dealers said, while the Ugandan currency held steady.
KENYA
The Kenya shilling <KES=> strengthened against the dollar during the week due to slow demand for the U.S. currency and banks squaring their positions.
At 1110 GMT leading commercial banks quoted the shilling at 61.65/75 against the greenback compared with last Wednesday's close of 61.95/62.05.
"Demand for dollars in the market has completely fallen off," said Chris Muthoka, a senior dealer at Citibank.
Dealers added that trade was generally slow during the week.
"Some banks have been squaring their general positions for the last two or three days but now we have reached the support level of 61.50," said Theo Osogo, a dealer at Equity Bank.
The shilling has struggled to strengthen beyond 61.50.
Dealers said they expected the shilling to firm in the short term due to dollar inflows for the initial public offering of mobile phone firm Safaricom.
The government announced on Wednesday that foreign buyers would pay 5.50 shillings per share, a 10 percent premium over what local investors will pay.
It expects to raise at least 50 billion shillings from the sale of a 25 percent stake in the firm.
But longer term, dealers said they saw the shilling coming under pressure from, among other factors, rising inflation, which rose to 26.6 percent in April from 21.8 percent in March.
"Inflation is going through the roof, interest rates seem to be going in the same direction so we will see the shilling come under pressure in the medium to long term," Muthoka said.
TANZANIA
The Tanzania shilling <TZS=> strengthened slightly during the week, helped by slowing demand for the U.S. currency and central Bank of Tanzania selling some dollars, dealers said.
The local unit traded at 1,207/1,214 to the dollar, compared with 1,218/1,228 at last Wednesday's close.
"Demand for dollars was slow this week, the central bank has been selling small amounts (of dollars) in the market," said Christopher Makombe, head of trading at Standard Chartered Tanzania.
Dealers said that going ahead the local unit was expected to strengthen further, helped by increased inflows from donors, further dollar sales by the central bank and export proceeds from agriculture.
The local unit is expected to trade in the 1,190-1,210 range against the dollar in coming days, dealers said.
UGANDA
The Uganda shilling <UGX=> held steady against the dollar in slow trade during the week with inflows and demand evenly matched, dealers said.
Leading commercial banks posted the shilling at 1,670/1,680 to the dollar compared with 1,670/1,685 a week ago.
"The market is quiet. We are seeing low demand and marginal inflows," said Catherine Bulinda, head of treasury at Centenary Bank Uganda.
Dealers said demand for dollars that usually peaks at this time of the year had not materialised.
Market sentiment points to a stable shilling trading in a range between 1,670-1,680 in the absence of any market moving news, dealers said.
"We expect to see continued stability of the shilling at 1,670/1,680 levels and a likelihood of marginal appreciation on possible inflows for the treasury bills auction," said a market report from Stanbic Bank Uganda. (Reporting by George Obulutsa and Duncan Miriri in Nairobi and Susan Nabadda in Kampala)
