Bloomberg News

Kenya Shilling Gains for Fifth Day as Central Bank Curbs Supply

June 06, 2012

Kenya’s shilling gained for the fifth day, the longest winning streak in four months, as the central bank curbed money supply.

The currency of East Africa’s biggest economy appreciated as much as 0.8 percent to 85.03 per dollar and was trading 0.4 percent stronger at 85.40 by 12:57 p.m., the longest series of gains since Feb. 1, according to data compiled by Bloomberg.

Kenya accepted 4 billion shillings ($46 million) of 7.05 billion shillings of bids received for longer-term auction deposits, at a weighted average rate of 17.964 percent, a central bank official, who declined to be named in line with policy, said by phone from the capital, Nairobi. The bank had offered 4 billion shillings of the securities, the official said.

Kenya’s central bank introduced “longer tenor Term Auction Deposits as an additional instrument for liquidity management,” it said in in its monetary policy committee statement yesterday. The committee retained its benchmark rate unchanged at a record- high 18 percent, where it’s been since December.

“Despite the enhanced Open Market Operations undertaken in May 2012, excess liquidity conditions have persisted in the market thereby posing a risk to demand driven inflation pressure and exchange rate stability,” the central bank said. “The MPC will continue to monitor closely foreign exchange activities in the market and take appropriate measures to sustain exchange rate stability.”

The central bank has reduced money supply through about 95 billion shillings of repurchase agreements since May 2, while selling an unspecified amount of dollars in the market.

International Loan

Kenya received the first $240 million of a $600 million syndicated loan agreed with three international lenders last month, Joseph Kinyua, permanent secretary at the Finance Ministry, said in an e-mailed statement yesterday. The remaining $360 million will be drawn down after one month, he said.

Kenya’s trade deficit widened in March as fuel imports rose to the highest in seven months, the Kenya National Bureau of Statistics said on May 30 on its website. The gap increased 22 percent from a year earlier to 80.3 billion shillings ($938 million). The inflation rate fell to the lowest for more than a year in May, slowing for a sixth month, to 12.2 percent from 13.1 percent a month earlier, the Nairobi-based Kenya National Bureau of Statistics said in an e-mailed statement on May 30.

The Ugandan shilling gained 0.1 percent to 2,487.50 per dollar, while Tanzania’s shilling remained unchanged at 1,588 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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