Bloomberg News

Kenya’s Shilling Ends Lower; Central Bank Raises Interest Rates

December 01, 2011

Dec. 1 (Bloomberg) -- Kenya’s shilling, the world’s best- performing currency against the dollar over the past month, weakened for the first time in three days. The market closed before the central bank announced it increased interest rates.

The currency of East Africa’s biggest economy depreciated as much as 0.3 percent to close at 89.75 per dollar in Nairobi. The currency has added 9.6 percent since Nov. 1, making it the best performer worldwide against the dollar among more than 170 currencies tracked by Bloomberg.

The central bank raised its benchmark interest rate for a fourth consecutive time by 1.5 percentage points to 18 percent to curb inflation that’s more than double the government’s target. Inflation, spurred by the worst regional drought in 60 years and higher fuel prices, accelerated to 18.9 percent in October from 17.3 percent in the previous month.

The Tanzanian shilling gained 0.2 percent to close at 1,680.9 per dollar. “Bank of Tanzania is still providing dollars to the market even today, which explains the appreciation of the shilling against the dollar,” Julius Mcharo, head of treasurer at Commercial Bank of Africa Tanzania Ltd., said by phone from Dar es Salaam.

Uganda’s currency gained for fourth day, gaining 1.2 percent to close at 2,535 per dollar.

“The shilling has gained because of a tight monetary position in the market following the settlement of Treasury bills auctioned yesterday,” Abbey Mutabali, a currency trader at Centenary Bank Ltd., said by phone from Kampala. The East African nation’s central bank auctioned 120 billion shillings worth of three-, six- and 12-month Treasury bills.

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

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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