Bloomberg News

Kenya Shilling Drops Most This Month on Post-East Dollar Demand

April 11, 2012

Kenya’s shilling weakened the most this month on increased dollar demand from businesses after the Easter holiday break.

The currency of East Africa’s biggest economy depreciated as much as 0.4 percent, the most in a closing basis since March 30, to 83.35 per dollar, and was trading 0.1 percent weaker at 83.15 as of 4:18 p.m., in Nairobi.

“The weakening of the shilling is due to increased dollar demand as businesses resume after the Easter break,” John Muli a dealer at Nairobi-based Africa Banking Corp., said in a phone interview today.

“The money market liquidity improved” during the week ended April 4, supported by government payments and foreign- exchange purchases by the central bank from the interbank market, the Central Bank of Kenya said in its weekly bulletin on April 5. The bank’s monetary policy committee retained the central bank rate at 18 percent on April 4 to ensure that inflation continues to decline toward the government target while maintaining exchange-rate stability.

The bank accepted 5 billion shillings ($60 million) for seven-day repurchase agreements at a weighted average rate of 15.529 percent, Godfrey Putunoi, a bank official, said by phone today from the capital.

The bank has removed a total of 19.6 billion shillings from the market since April 5, after the monetary policy committee indicated it would intervene to curb volatility.

The inflation rate declined for a fourth month to 15.61 percent in March from 16.69 percent in February, the Kenya National Bureau of Statistics said last month.

Tanzania, Uganda

Tanzania’s shilling strengthened on increased dollar inflows from the mining industry for payment of taxes. The currency of the second-biggest economy in East Africa gained as much as 1 percent to 1,573.50 per dollar and last traded 0.1 percent higher at 1,588.

“There have been significant inflows from the mining sector due to tax commitments for the first quarter of the year,” Eric Chijoriga, a trader with National Bank of Commerce Ltd., ABSA Group’s Tanzanian unit, said today by phone from Dar es Salaam, the commercial Capital.

The Ugandan shilling weakened the most in more than a month on increased dollar demand by oil importers. The currency of the third-biggest economy in East Africa depreciated 1.4 percent, the most since March 7, to 2,510 per dollar.

“The shilling lost ground on the back of dollar demand by oil importers who were active players in the market today,” Faisal Bukenya, the head of currency trading at Barclays Bank of Uganda Ltd., said by phone from Kampala.

-- 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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