Kenya’s shilling weakened for a second day on dollar demand from oil importers and the nation’s manufacturers.
The shilling’s decline today extended its loss this year to 1.7 percent as inflation accelerated to 3.7 percent in January from 3.2 percent a month earlier, the Nairobi-based Kenya National Bureau of Statistics said on Jan 31. That’s still below the government’s target of 5 percent, implying central bank policy action may not be imminent. Tanzania’s shilling depreciated 2.3 percent this year, while Uganda’s shilling gained 0.5 percent.
“There is demand for dollars mainly from the energy and manufacturing sectors,” John Muli, a dealer at Nairobi-based African Banking Corp., said by phone. “There is tight liquidity which is cushioning the shilling from a rapid fall and central bank has supported it through regular direct sale of dollars.”
The currency of East Africa’s biggest economy slipped 0.4 percent against the dollar to 87.55 by 3:29 p.m. in Nairobi.
Kenya’s shilling has depreciated as the country’s foreign exchange reserves slid to $4.96 billion shillings on Jan. 31 from $5.18 billion a week earlier, the central bank said on its website on Feb. 1. The weighted average interbank lending rate rose to 6.66 percent by Jan. 30 from 5.82 percent in the previous week, it said.
The shilling is also under pressure as the country will hold its presidential vote on March 4, the first since a disputed 2007 poll sparked two months of violence in which more than 1,100 people died, a deterrent for foreign tourists and negative for foreign-exchange inflows.
Kenya’s central bank accepted the 2 billion shillings ($22 million) of seven-day repurchase agreements offered today, an official, who also asked not to be identified in line with policy, said. The bank, which had put up 10 billion for sale, uses repos to withdraw excess money supply from the market and support the shilling.
Tanzania’s shilling depreciated for a fifth day, weakening 0.1 percent to 1,623 per dollar, the lowest since December 2011, while the Ugandan shilling lost 0.3 percent to 2,664.88 per dollar.
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