Kenya central bank sells dollars to support ailing local unit

NAIROBI - The Kenyan shilling recovered yesterday after the central bank intervened to prop up the ailing currency which had weakened to a five-month low on strong importer for dollars.

NAIROBI - The Kenyan shilling recovered yesterday after the central bank intervened to prop up the ailing currency which had weakened to a five-month low on strong importer for dollars.       

The shilling had lost nearly 2 per cent since July 3 to hit 87.55/75 before the central bank intervened by selling dollars directly in the market.

It gained 0.7 per cent after the intervention, to close at 86.90/87.10.

The losing run had wiped out all the gains the currency had made against the dollar this year after a peaceful Kenyan election in March.

The shilling initially slid alongside other emerging market currencies when the US Federal Reserve signalled in May it would start to unwind its stimulus programme.

It now faces pressure from the unrest in Egypt, the biggest buyer of Kenyan tea, which is an important source of foreign exchange.

“I see it cooling off for now ... maybe today only. But in the long term, I revise my target from 88 to 90,” said a trader at one commercial bank, adding that the central bank may use other means at its disposal to intervene.

“They may limit trading activities,” he said.

The bank has been mopping up liquidity in money markets using repurchase agreements and term auction deposits since last year, to make it more expensive for banks to hold long dollar position.

The benchmark share index rose for the fifth straight session, up 0.5 per cent to 4,746.26 points, with investors betting that listed companies would post solid first-half results thanks to a strengthening economy after the peaceful polls in March. 

“Prospects of good interim earnings across the banking, insurance and manufacturing sectors have whet investors’ appetite,” said Ronald Lugalia, an analyst at Afrika Investment Bank.

Mobile phone service provider Safaricom, the most capitalised stock on the bourse, rose 3.5 per cent to sh7.30 a share, while KenGen, the country’s main electricity producer, climbed 3.8 percent to sh15.85.

In the debt market, bonds worth sh1.7b ($19.5m) were traded, down from sh755m on Friday.

 

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