Kenya Shilling Weakens for a Second Day as Dollar Demand Rises
Kenya’s shilling weakened for a second day as businesses bought dollars in anticipation of a further depreciation in the currency of East Africa’s biggest economy.
The shilling declined 0.7 percent to 85.30 per dollar by 4:20 p.m. in Nairobi, according to data compiled by Bloomberg.
“The weakening of the shilling is due to accumulation of dollars by businesses as they anticipate the shilling to weaken further in the coming days,” Raphael Agung, a currency dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview. “Businesses are taking advantage of the recent consolidation to buy dollars at favorable rates,” Agung said.
The shilling rallied for a sixth day to 84.6 on June 7, gaining 1.1 percent, the most since December. The central bank in Kenya retained its benchmark rate at a record-high of 18 percent in its monetary policy committee meeting June 5, holding it for a sixth month. “The Kenya Shilling remains vulnerable to external shocks due to the current-account deficit, estimated at 11.4 percent of GDP in April 2012 and the instability in the eurozone,” the bank said in the statement on June 5.
Kenya accepted 5.4 billion shillings in seven-day repurchase agreement at a weighted average rate of 17.3 percent, a central bank official who declined to be named in line with policy said by phone from the capital, Nairobi. The bank received bids totaling 5.85 billion shillings for the securities, the official said.
The central bank introduced “longer tenor Term Auction Deposits as an additional instrument for liquidity management,” it said in its monetary policy committee statement June 5. It accepted all of 4.6 billion shillings in bids for TADs maturing in 14, 21 and 28 days at a rate of 18 percent.
Tanzania’s shilling gained 0.6 percent to 1,578.07 per dollar, while the Ugandan shilling weakened by less than 0.1 percent to 2,486.50 per dollar.
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