June 17 (Bloomberg) -- Kenya’s shilling rebounded from the weakest level in 17 years against the dollar after the central bank sold three-month Treasury bills, reducing supply of the local currency in the market.
The currency of East Africa’s biggest economy appreciated as much as 0.6 percent to 89.49 per dollar and traded 0.3 percent stronger at 89.75 by 2 p.m. in the capital, Nairobi. The shilling closed at 90.05 per dollar yesterday, the weakest level since March 1994.
The Central Bank of Kenya, which had offered 2 billion shillings ($22.2 million) of the 91-day treasury bills, received 13.7 billion shillings of bids and accepted 6.7 billion shillings.
“The correction of the local unit is due to tight liquidity following the acceptance of 6 billion shillings in yesterday’s 91-day treasury bill auction,” Julius Kiriinya, a dealer at Nairobi-based African Banking Corp., said in a phone interview today.
Kenya’s government has no plans to stem the shilling’s weakness against the dollar even as it is concerned about the drop, Finance Minister Uhuru Kenyatta said.
“We don’t want to say that we are going to interfere with market forces” even though there is “some concern” over the shilling’s depreciation, Kenyatta told reporters today in Nairobi, the capital.
Kenya’s central bank rejected all of the 1 billion shillings of bids it received for the same amount of repurchase agreements it offered at a sale today, an official who declined to be identified in line with the bank’s policy said today.
In a repurchase agreement an investor agrees to sell a security to another trader, while at the same time arranging to buy it back at a future date and at a pre-determined price.
--Editors: Ana Monteiro, Linda Shen
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