Kenyan Shilling Weakens First Time in Five Days on Money Supply

Kenya’s shilling weakened for the first time in five days as the central bank accepted fewer bids for its term-auction deposits, reducing the amount of money. withdrawn through open market operations to manage total supply.

The currency of East Africa’s largest economy depreciated as much as 0.4 percent and traded 0.1 percent lower at 84.45 by 2:04 p.m. in Nairobi, the most on a closing basis since June 12, according to data compiled by Bloomberg.

Kenya’s central bank accepted 1 billion shillings ($11.8 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 TADs yesterday, tightening money supply more than it did today. The shilling strengthened 0.7 percent to 84.33 per dollar yesterday, the highest level in a month. It has gained 0.8 percent this year, the best-performing among the African currencies tracked by Bloomberg. The regulator has mopped up 119 billion shillings in seven-day repos since April 27 and 26.4 billion shillings in TADs since June 6, according to data compiled by Bloomberg.

The bank re-introduced term-auction deposits as a “liquidity management” measure on June 5, according to a statement on its website. TADs 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 weakened 0.2 percent to 2,490 per dollar, the first time in three days, while Tanzania’s currency appreciated for a third day, gaining 0.2 percent to 1,579.78 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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