Kenya’s shilling weakened for a second day, heading for a seven-month low, on speculation the central bank will cut its benchmark interest rate this week.
The currency of East Africa’s biggest economy depreciated as much as 0.3 percent to 86.56 a dollar and traded at 86.50 by 1:10 p.m. in Nairobi, the capital. A close at this level would be the lowest since May 30, according to data compiled by Bloomberg.
The Central Bank of Kenya’s Monetary Policy Committee, led by Governor Njuguna Ndung’u, will meet on Jan. 10, the bank said on its website. The panel lowered the benchmark interest rate by 2 percentage points to 11 percent when it last convened on Nov. 7. Inflation slowed for a 13th consecutive month to 3.2 percent in December from 3.3 percent a month earlier, remaining below the government’s target of 5 percent, Nairobi-based Kenya Bureau of Statistics said on Dec. 28.
“The shilling is under pressure due to an anticipated rate-cut decision,” Nairobi-based NIC Bank Ltd. (NICB) said in a note to its clients.
The central bank has lowered its key lending rate by 7 percentage points since July to stimulate the economy after growth slowed to 3.3 percent in the second quarter from 3.4 percent in the first. Expansion quickened to 4.7 percent in the three months to September.
Kenya’s benchmark interest rate is seen at 10 percent this year, according to the median forecast of four economists surveyed by Bloomberg in November.
“The outlook is for a 50 to 100 basis-point cut as they seek to support the economy but with a keen eye not to put the shilling under further pressure,” Duncan Kinuthia, the head of trading at Commercial Bank of Africa Ltd., said by phone from Nairobi.
The central bank offered 7.1 billion shillings ($82 million) of seven-day repurchase agreements, a bank official who asked not to be identified in line with policy, said by phone today.
The Ugandan shilling weakened 0.7 percent to 2,735 a dollar, declining for a third day. Tanzania’s shilling traded unchanged at 1,592 per dollar after depreciating for three days.
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