Bloomberg News

Kenya Shilling Strengthens First Day in Three on Dollar Inflows

January 16, 2012

Jan. 16 (Bloomberg) -- Kenya’s shilling strengthened the most in more than a week as the central bank removed money supply through repurchase agreements.

The currency of East Africa’s biggest economy appreciated as much as 0.7 percent, the most since Jan. 6, to 86.78 per dollar and was trading 0.5 percent stronger at 86.90 at 3:46 p.m. in Nairobi.

The Central Bank of Kenya accepted 2.8 billion shillings ($32 million) of bids for the 4.5 billion shillings of repurchase agreements it offered at 17.402 percent, a bank official, who did not wish to be identified in line with the bank’s policy, said by phone today from Nairobi, the capital.

In a repurchase agreement an investor agrees to sell a security to another trader, while at the same time arranging to buy it back at a future date and at a pre-determined price.

Tanzania’s shilling weakened for a second day on increased dollar demand from oil importers and the telecommunication sector. The currency depreciated 1.2 percent to 1,597.10 and was trading 0.2 percent lower at 1,582.83 at 3:06 p.m. in Dar es Salaam, the commercial capital.

“There is demand coming in from the oil importers and telecommunication sector,” Fred Siwale, a dealer with CRDB Bank Plc, said today by phone from Dar es Salaam, the commercial capital.

Uganda’s currency weakened for the first day in seven, as dollar demand increased following an end to a four-day strike by businesses.

The shilling was 1.6 percent lower at 2,442.90 per dollar and was trading 0.4 percent down at 2,415.25 at 4:02 p.m. in Kampala, the capital.

“The weakening of the shilling is due to increased dollar demand as traders are now in the market seeking the dollar,” Timothy Muzoora, the head of currency trading at Cairo International Bank Ltd. said today by phone from Kampala. “Going forward, the shilling may weaken further as there is an appetite for the dollar in the market.”

Business owners had called the strike over increased commercial-bank interest on loans.

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

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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