Bloomberg News

Kenya Shilling Weakens Third Day, Businesses Accumulate Dollars

January 08, 2013

Kenya’s shilling weakened for a third day, heading for a seven-month low as businesses accumulated dollars before a Dec. 10 central bank meeting.

The currency of East Africa’s biggest economy depreciated by as much as 0.2 percent to 86.60 a dollar and traded at 86.53 by 1:02 p.m. in Nairobi, the capital. A close at that level will be the lowest since May 30 and would bring the shilling’s losses this year to 0.5 percent, according to data compiled by Bloomberg.

“The shilling has been under pressure since the year opened, as companies accumulate dollars ahead of the monetary policy committee meeting,” Christopher Muiga, a senior trader at Nairobi-based Kenya Commercial Bank Ltd., said by phone. “The expectation is a moderate cut to avoid putting more pressure on the shilling.”

The central bank sold an unspecified amount of dollars yesterday to meet growing demand, Muiga said.

The Central Bank of Kenya’s Monetary Policy Committee, led by Governor Njuguna Ndung’u, lowered the benchmark interest rate by 2 percentage points to 11 percent when it last convened on Nov. 7. Inflation slowed for a 13th straight month to 3.2 percent in December, below the government’s target of 5 percent, the Kenya Bureau of Statistics said Dec. 28.

The country has lowered its lending rate by 7 percentage points since July to stimulate growth. The benchmark interest rate will be 10 percent this year, according to the median forecast of four economists surveyed by Bloomberg in November.

The central bank offered 2 billion shillings of seven-day repurchase agreements, a bank official who asked not to be identified in line with policy, said by phone. The bank accepted twice the amount it offered at a sale yesterday, taking all 14.3 billion shillings received, for seven-day repurchase agreements and 14-day term auction deposits.

The Ugandan shilling weakened 0.5 percent to 2,716 a dollar, the weakest since Oct 25, 2011, while Tanzania’s shilling depreciated by 0.7 percent to 1,593 a 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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