NAIROBI, March 26 (Reuters) - The Kenya and Tanzania shillings weakened against the dollar in the week to Wednesday, while the Ugandan currency firmed slightly, dealers said.
KENYA
The Kenyan shilling <KES=> lost ground against the dollar during the week, driven largely by commercial bank trade and future trade will depend on this week's initial share offer of leading mobile firm Safaricom and on politics, dealers said.
At 1220 GMT, commercial banks quoted the shilling at 63.95/64.15, compared with last Wednesday's close of 62.80/90.
"We have seen the shilling lose ground from last week. Mainly it is markets being driven by interbank players and a bit of end of month corporate demand for dollars," said Christopher Muthoka, a senior dealer at Citibank.
Dealers said there was scant demand for the dollar in the market and going forward the local unit's direction will hinge on the share offer of Safaricom which starts this week.
It will also depend on the political climate, following the signing of a law binding a power-sharing agreement between President Mwai Kibaki and prime minister-to-be Raila Odinga.
Local media have reported of a deadlock in naming of a new cabinet incorporating members of Odinga's Orange Democratic Movement into the half-cabinet Kibaki named in January amid post-election unrest over a disputed presidential vote.
Kibaki's coalition and ODM have been reported to have different ideas on the cabinet's size and who gets what they feel are key portfolios.
"It all depends on how the existing issues on the formation of the cabinet are resolved and how quickly this country gets a running government," said Peter Njuguna, a senior dealer at Commercial Bank of Africa.
"If that doesn't happen soon and investors feel there is a stalemate, then the shilling could weaken even further."
TANZANIA
The Tanzania <TZS=> shilling weakened against the dollar, undermined banks covering their short positions and by demand from the energy sector and a dearth of export proceeds coupled with central bank's absence in the market.
The shilling was quoted at 1,220/1,230 to the dollar compared with last Wednesday's close of 1,150/1,175.
"Most banks seem to have short (dollar positions), so they were looking to square them. Secondly there's demand from ... energy companies," said Stephen Rocky, a dealer at Kenya Commercial Bank Tanzania.
Dealers said the shilling also lost ground due to little dollar flows coming to the market from exporters.
"If Bank of Tanzania will intervene, then the rate will stabilise," Rocky said.
Dealers said they had also seen some demand for the U.S. currency from buyers outside the country.
"There's a lot of offshore buyers of the dollar. They are putting a lot of pressure on the shilling," said Samwel Marco, a dealer at Stanbic Bank Tanzania.
The local unit's losses are expected to be capped at 1,240 against the dollar in coming days, dealers added.
UGANDA
The Ugandan shilling <UGX=> firmed slightly against the dollar during the week largely due to trade amongst commercial banks.
Leading commercial banks in Kampala posted the local unit at 1,690/1,700 to the dollar compared with 1,702/1,707 a week ago.
"We have seen some end-month (dollar) inflows that have been evenly matched by interbank demand for the dollar," said Denis Mushabe Mashanyu, a dealer at Standard Chartered Bank Uganda.
Dealers were divided on the direction of the local unit with some predicting it would hold steady while others anticipated strengthening of the shilling.
"The shilling is expected to remain stable with possible appreciation on the back of end month inflows," said a market report from Stanbic Bank Uganda.
Dealers said they expect the shilling to trade in the 1,680-1,700 range to the dollar in the coming days. (Reporting by George Obulutsa and Duncan Miriri in Nairobi and Susan Nabadda in Kampala)
