Bloomberg News

Kenya Shilling Gains Most This Month Before Securities Payments

April 13, 2012

Kenya’s shilling strengthened the most this month, as investors prepare to settle their payment for government securities on Monday and the central bank removed money supply from the market.

The currency of East Africa’s biggest economy appreciated 0.6 percent, the most on a closing basis since March 28, to 82.85 per dollar as of 4:42 p.m. in Nairobi.

“The shilling is gaining on increased dollar inflows as investors prepare to settle their payment for the treasury bills sold this week,” John Muli, a dealer at Nairobi based African Banking Corp., said by phone today.

The Central Bank of Kenya sold a total of 7.2 billion shillings ($87 million) of 91-days and 182-days treasury bills, it said in an e-mailed statement on April 11. The bank changed its previous auction system combining the sale of the treasury bills as it shifts to a new operating system, with bids accepted in the Wednesday auction to be settled on Mondays.

The bank accepted 6.5 billion shillings today in bids for repurchase agreements at a weighted average rate of 15.527 percent, an official said. The bank has removed a total of 31.1 billion shillings from the market since April 5, after the monetary policy committee indicated it would intervene to curb volatility.

“The removal of liquidity by central bank through repurchase agreement has also aided the shilling, with inter- bank on the rising to 13.359 percent from yesterday’s 12.468 percent,” NIC Bank Ltd. (NICB), said in its daily market note.

“We will continue with the current tight monetary policy until we are sure we are out of the woods,” Finance Minister Njeru Githae told reporters in the capital on April 11.

Inflation Rate

The committee retained the central bank rate at 18 percent to ensure that inflation continues to decline toward the government target while maintaining exchange rate stability.

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

Tanzania’s shilling strengthened for a second day, with the currency of the second-biggest economy in East Africa, climbing as much as 0.3 percent to 1,578.54 per dollar, the highest on a closing basis since Jan 12. It traded 0.1 percent stronger at 1,581 as of 4:02 p.m.

“There is liquidity tightness caused mainly by banks buying shillings from their long dollar positions hence the strengthening of the shilling,” said Emmanuel Mwasanguti, a dealer with CRDB Bank Plc, said by phone today from Dar es Salaam, the commercial capital.

The Ugandan shilling gained the most in more than nine months. The currency of the third-biggest economy in East Africa appreciated as much as 2.7 percent to 2,452.50 per dollar, the strongest gain on a closing basis since June 30, and was trading 1.7 percent stronger at 2,477.5 at 4:47 p.m.

“The shilling gained from dollar inflows to the non- governmental sector and investors targeting government securities,” Faisal Bukenya, the head of currency trading at Barclays Bank of Uganda Ltd. Said by phone from Kampala. The government plan to sell 120 billion shillings of three-, six-and 12-month Treasury bills next week, he said.

-- With assistance from David Malingha Doya in Dar es Salaam and Fred Ojambo in 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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