Bloomberg News

Kenya Shilling Gains for 2nd Day on Bank Policy to Curb Losses

June 29, 2011

June 29 (Bloomberg) -- Kenya’s shilling strengthened for the second day against the dollar after the central bank announced policy measures aimed at reining in inflationary expectations and curbing speculative trade in the currency.

The shilling appreciated as much as 0.6 percent to 89.63 per dollar and was 0.4 percent stronger at 89.80 by 2:35 p.m. in the capital, Nairobi from yesterday’s close of 90.15.

The central bank of East Africa’s biggest economy will start charging commercial lenders 8 percent on loans from its so-called overnight discount window and review the rate on a daily basis at 9 a.m., it said in an e-mailed statement today. The bank also blocked use of funds borrowed from the overnight window to trade in the interbank market or in the foreign- exchange market, it said.

“This decision is expected to address the recent wild swings in the local currency, which was largely due to arbitrage and speculative trading,” Fred Moturi, a fixed-income dealer at Nairobi-based Sterling Investment Bank Ltd., said in a phone interview today.

Kenya’s inflation rate climbed for the eighth straight month to 14.5 percent in June, the highest in more than two years, as food and fuel prices increased, the Kenya National Bureau of Statistics said earlier today. The shilling has declined 10 percent against the dollar this year, making it Africa’s second-worst performing currency, after neighboring Uganda’s, according to data compiled by Bloomberg.

--Editors: Ana Monteiro, Alex Nicholson

To contact the reporter on this story: Johnstone Ole Turana in Nairobi at jturana@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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