Kenya Shilling Weakens Third Day as Oil Importers Buy Dollars

Kenya’s shilling weakened for a third day as oil importers increased demand for dollars.

The currency of East Africa’s largest economy depreciated as much as 0.5 percent to 84.22 per dollar and was trading 0.3 weaker at 84.10 by 2:37 p.m., in the capital Nairobi. The shilling has gained 3.2 percent since May 30, according to data compiled by Bloomberg.

“Kenya’s shilling slipped against the U.S dollar, primarily because of energy sector importers’ need for the U.S currency,” Nairobi-based NIC Bank Ltd. (NICB) said in an e-mailed note to clients. Trading levels are expected to range from 83.50 to 84.30 today, the bank said.

The bank today sold 2 billion shillings ($23.8 million) of seven-day repurchase agreements at a weighted average rate of 14.4 percent, said an official, who asked not to be identified in line with policy. The bank received bids totalling 8.89 billion shillings after offering 2 billion shillings for repos and term auction deposits, the official said by telephone from Nairobi, the capital. The central bank refused all bids for term-auction deposits, he said.

The longer-tenure term auction deposits introduced as “additional instruments in liquidity management have enhanced the open market operations and stabilised the interbank rate,” the bank’s monetary policy committee said July 5.

The bank cut its benchmark lending rate for the first time in 18 months last week, reducing the key rate by 1.5 percentage points to 16.5 percent. The bank raised borrowing costs by a record 12.25 percentage points in 2011 to help bolster the shilling and curb price pressures following drought.

Inflation declined for the seventh straight month to 10.1 percent from 12.2 percent in May, the Kenya National Bureau of Statistics said June 29.

The Tanzanian shilling gained 0.3 percent to 1,586.50 per dollar, while Uganda’s shilling also added 0.3 percent to 2,466.50 per 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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