Bloomberg News

Kenya’s Shilling Reaches 6-Month High on Money Supply Squeeze

December 14, 2011

Dec. 14 (Bloomberg) -- The Kenyan shilling appreciated to its strongest level against the dollar in six months after the central bank restricted money supply for a second trading session.

The currency of East Africa’s biggest economy rose for a second day, gaining 1.7 percent against the dollar to 87.53 by 1:57 p.m. in Nairobi, its highest intra-day trading level since June, according to data compiled by Bloomberg.

Kenya’s central bank received 9.5 billion shillings ($108 million) in bids for repurchase agreements today and accepted 4 billion shillings at a rate of 12.913 percent, said Donald Murgor, a dealer at the regulator. Yesterday, the central bank sold 2 billion shillings in seven-day repos, as the agreements are known, at a rate of 14.156 percent after receiving bids of 9.55 billion shillings. In a repo, the regulator sells securities at a fixed rate in a bid to withdraw money circulating in the banking system.

“The repo has mopped liquidity, and it’s more expensive to run short-shilling positions,” Wilson Mutai, a dealer with ABC Bank based in Nairobi, Kenya’s capital, said by phone today.

Uganda’s shilling surged for a sixth day in seven, adding 2.3 percent to 2,390 per dollar. That extended the currency’s gains to 19 percent since the start of October, making it the world’s best-performing currency this quarter.

“We are continuing to see some good dollar inflows from the commodity sector led by coffee,” Taib Lubega, a currency trader at Stanbic Bank Uganda Ltd., said by phone from Kampala, the capital, today.

Tanzania’s currency gained 1.1 percent to 1,609 per dollar, heading for its highest close since Aug. 15. “We have seen inflows coming in from the mining and tourism sectors today,” Yonoh Mtengule, chief economist at National Bank of Commerce Ltd. said by phone from Tanzania’s commercial hub of Dar es Salaaam.

-- With assistance by Fred Ojambo in Kampala, Uganda and David Malingha in Dar es Salaam, Tanzania. Editors: Peter Branton, Alex Nicholson

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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