Bloomberg News

Kenya’s Shilling Climbs to Three-Month High on Low Dollar Demand

November 17, 2011

Nov. 17 (Bloomberg) -- Kenya’s shilling, the world’s best- performing currency against the dollar this month, climbed to the strongest in more than three months as demand for the U.S. currency was subdued with businesses settling tax obligations.

The currency of East Africa’s biggest economy advanced 1.5 percent to 92.23 per dollar, the strongest intra-day level since Aug. 5, and was trading 1.4 percent higher at 92.28 at 3:49 p.m. in Nairobi, according to data compiled by Bloomberg.

Kenya’s monetary policy committee increased the key lending rate by 5.5 percentage points to a record 16.5 percent on Nov. 1 as it battles to contain inflation spurred by the worst regional drought in 60 years and higher fuel prices. Inflation accelerated to 18.9 percent in October from 17.3 percent in the previous month.

“The shilling has gained against the dollar due to subdued demand for the greenback as local businesses hold onto the shilling to settle their tax obligations,” Jeremiah Kendagor, acting head of trading at Nairobi-based Kenya Commercial Bank Ltd., said by phone. Kenya businesses are due to pay value added tax, withholding tax, aviation fees and excise duty by Nov. 20, according to the Kenya Revenue Authority website.

The Tanzanian shilling strengthened for a third day, to the highest in more than two weeks, adding 3.6 percent to 1,690 against the dollar and trading 0.1 percent higher at 1,751.56 at 3:48 p.m.

“The central bank has been supplying dollars directly to the market to meet demand hence the appreciation of the shilling,” Eric Chijoriga, a trader with National Bank of Commerce Ltd., ABSA Group’s local unit said by phone from Dar es Salaam, Tanzania’s commercial capital.

Uganda’s currency gained for a second day, rising 1 percent to 2,558.35 per dollar and was trading 0.4 percent higher at 2,575.15 at 3:20 p.m.

“The shilling has gained because of the settlement of yesterday’s treasury bill auction which attracted in dollars,” Daniel Sage, a currency trader at Centenary Bank Ltd. said by phone from Kampala.

--With assistance from Fred Ojambo in Kampala and David Malingha Doya in Dar es Salaam. Editors: Peter Branton, Ash Kumar

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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