Kenya Shilling Rises to Month-High, Kenya Receives Loan Tranche

Kenya’s shilling rose for a fifth day to the highest in more than a month as the government was said to receive the remainder of a loan and the central bank reduced money supply through its term-deposit auctions.

The currency of East Africa’s largest economy appreciated 0.3 percent to close at 84.10 per dollar, its strongest level since May 15, in the capital Nairobi.

“Kenya’s shilling rallied against the dollar helped by receipt of a second tranche of the government’s $600 million syndicated loan from international lenders to fund a range of infrastructure projects and tight liquidity,” Nairobi-based NIC Bank Ltd. (NICB), said in a note to clients.

Kenya’s government signed a $600 million two-year loan on May 15, with three foreign banks that will be repaid at an interest rate of 475 basis points above the London interbank offered rate. The nation has received the first $240 million, the Finance Ministry said June 5.

“The receipt of the second tranche of $360 million is expected to support the foreign-exchange reserves and ease pressure on the shilling as dollar demand will easily be met,” John Muli, a dealer with Nairobi-based African Banking Corp., said in a phone interview.

The central bank accepted 1 billion shillings ($11.9 million) of bids for 28-day term-auction deposits, paying a weighted average rate of 18 percent, a central bank official who asked not to be named in line with policy said. It received bids of 3.15 billion shillings, the official said.

The bank accepted 5 billion shillings in repurchase agreements and term-auction deposits yesterday. The shilling has gained 1.1 percent this year, the best performer among the African currencies tracked by Bloomberg.

‘Liquidity Management’

The bank re-introduced term-auction deposits as a “liquidity management” measure on June 5, according to a statement on its website. The deposits offer maturities of 14, 21 and 28 days and are paid back with interest, while the tenor of repos is typically seven days or less and the securities are offered at a discounted yield, according to a research note from Nairobi-based Sterling Capital Ltd e-mailed June 11.

Uganda’s shilling gained less than 0.1 percent to close at 2,485 per dollar, while Tanzania’s currency appreciated for a third day, gaining less than 0.1 percent to close at 1,582 per dollar.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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