Bloomberg News

Kenya Shilling Gains to 7-Month High on Cash Reserve Measures

December 16, 2011

Dec. 16 (Bloomberg) -- Kenya’s shilling strengthened for a fourth day against the dollar, the longest winning streak in three weeks, as dollar inflows increased while businesses preparing for the year-end reduced demand.

The currency of East Africa’s biggest economy gained as much as 2.2 percent to 83.10 per dollar and was trading 1.9 percent stronger at 83.35 at 12:03 p.m. in Nairobi. A close at this level will be the highest since May 2.

“There is an increase in dollar inflow from non- governmental organizations, diaspora remittances and proceeds from tea sales at a time of low demand from the businesses as the year comes to an end, leading to the strengthening of the shilling,” Duncan Kinuthia, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview today.

Kenya’s central bank increased the cash reserve ratio, the percentage of total deposits commercial banks are prohibited from lending, by 50 basis points to 5.25 percent as of yesterday. The bank will stay out of repurchase agreements today, Donald Murgor, a dealer at the Nairobi-based bank, said in an interview.

The bank has mopped up 6.25 billion shillings ($74.8 million) from the market through repurchase agreements in the last three days. In a repo, the regulator sells securities in a bid to withdraw money supply from the system.

Uganda’s currency remained unchanged at 2,385 per dollar while the Tanzanian shilling gained for a third day this week, rising 0.4 percent to 1,603 per dollar.

-- Editors: Peter Branton, Linda Shen

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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