Jan. 12 (Bloomberg) -- Kenya’s shilling weakened for the third day out of four this week, headed for its lowest close in more than a week, on concern that balance of payment pressure and the European debt crisis would weigh on the exchange rate.
The currency of East Africa’s biggest economy declined 0.7 percent to 87.75 per dollar and was trading 0.5 percent weaker at 87.58 at 4:13 p.m. in Nairobi. A close at that level would be the weakest since Jan. 4, according to data compiled by Bloomberg.
“Concerns over the balance of payment situation and the ongoing Euro debt crisis is weighing on the shilling hence the weakening; a situation likely to persist in the foreseeable future,” Jeremiah Kendagor, head of trading at Nairobi based Kenya Commercial Bank Ltd., said in a phone interview today.
The central bank monetary policy committee yesterday noted that balance of payments pressures and continued turbulence in the global financial markets due to the European debt crisis present potential risks to the exchange rate.
The central bank of Kenya received 5.6 billion shillings ($64 million) of repurchase agreements and accepted 4 billion shillings at 17.5 percent.
The bank had offered 4 billion shillings, a central bank official, who could not be named in line with the bank policy, said by phone from Nairobi today.
Uganda’s shilling strengthened for the first day in more than a week, on lower dollar demand as businesses closed down following a strike.
The shilling retreated 1 percent against the dollar, after closing unchanged for four consecutive sessions, to 2,430.
“The shilling has gained due to lack of demand for the dollar as most of the traders are out of the market due to an ongoing strike,” Ahmed Kalule, the head of currency trading at Bank of Africa Uganda Ltd. said by phone from Kampala. Uganda business owners yesterday began a three-day strike protesting an increase in commercial bank rate interest rates on old loans.
“There are also dollar inflows as settlement for yesterday’s Treasury bill auction was done today,” Kalule said.
Uganda’s central bank yesterday sold 5 billion, 17.2096 billion and 85 billion of three-, six- and 12-month bills.
Today is a bank holiday in Tanzania.
--With assistance from Fred Ojambo in Kampala. Editors: Peter Branton, Alan Purkiss
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