Bloomberg News

Kenyan Interbank Rate Falls for the First Time in Three Weeks

August 30, 2011

(Updates with interbank rate in second paragraph.)

Aug. 30 (Bloomberg) -- Kenya’s average interbank lending rate fell for the first time in three weeks yesterday, after the country’s central bank introduced changes to the rules for obtaining funds through its overnight discount window.

The rate banks charge each other for credit in the East African nation declined to 27.7299 percent, compared with 28.4440 percent on Aug. 26, the Nairobi-based Central Bank of Kenya said in an e-mailed statement today. The interbank rate had risen every trading session since Aug. 8, according to central bank data.

The central bank loosened the requirement regarding the value of deposits lenders keep in reserves in guidelines that took effect yesterday. It will include a factor ranging from zero to one based on the amount of cash in the interbank market to calculate its overnight discount window rate and use a moving average of interbank lending rates over an unspecified period.

The new rules allow banks to hold cash-reserves equivalent to 4.75 percent of deposits over a monthly, rather than daily basis, as long as daily holdings don’t dip below 3 percent.

Kenya’s shilling gained against the dollar for the first day in four, strengthening 0.2 percent to 93.45 by 10:40 a.m. in Nairobi. The move pared the currency’s losses against the dollar this year to 13 percent. The shilling hit a more than 17 year low of 95.10 against the dollar on Aug. 9.

Kenya’s financial markets will be closed tomorrow for a public holiday to mark Eid al-Fitr, the end of Muslim holy month of Ramadan.

--Editors: Gordon Bell, Nasreen Seria

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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