Bloomberg News

Kenya Shilling Slumps, Set for Longest Losing Streak in 9 Months

May 15, 2012

Kenya’s shilling slumped for the sixth day, its longest losing streak in nine months, amid speculation oil importers were buying dollars in the market.

The currency of East Africa’s biggest economy depreciated as much as 1.1 percent and traded 0.4 percent lower at 84 per dollar by 4:03 p.m. in Nairobi. A close at that level would be the biggest six-day loss since August.

“Corporate buyers with pent-up demand for the dollar who have significant exposure are buying in anticipation of further weakening of the shilling,” Bernard Matimu, chief dealer at Nairobi based NIC Bank Ltd. (NICB), said in a phone interview today. There was increased demand from oil importers, he said.

Kenya accepted all 2.4 billion shillings ($28.5 million) of bids for repurchase agreements at a weighted average rate of 17 percent, after offering 5 billion shillings of the securities, an official of the bank who declined to be identified in line with policy said in a phone interview from the capital, today.

“The mop up action by the central bank has not supported the shilling substantially due to incoming dollar demand, hence the weakening streak,” Matimu said.

Kenya’s government signed a $600 million two-year loan accord with three foreign banks that will be repaid at interest rate of 475 basis points above the London interbank offered rate, Standard Bank Group Ltd. (SBK) said.

The loan has been underwritten by Citigroup Inc. (C:US), based in New York, Standard Bank, Africa’s biggest lender based in Johannesburg, and London-based Standard Chartered Plc (STAN), David McCaig, the global head of debt products at Standard Bank Group, said in an interview today in Nairobi, the Kenyan capital.

“We expect the loan, which will be in foreign currency, to assist in the stabilisation of the shilling and building up of the foreign-currency reserves,” Njeru Githae minister of finance told reporters in Nairobi, the capital.

Tanzania’s shilling gained for the first day in three, appreciating 0.3 percent to 1,578 per dollar, while the Ugandan shilling weakened 0.8 percent to 2,485 per dollar.

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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