Kenya Shilling Snaps Gain as Businesses Buy Dollars to Pay Bills
Kenya’s shilling reversed a two-day gain to depreciate the most in a week as businesses bought dollars to pay their end-of-the-month debts.
The currency of East Africa’s biggest economy weakened as much as 0.2 percent to 87.35 per dollar and traded at 87.30 by 12:33 p.m. in Nairobi, the most on a closing basis since Feb. 18, according to data compiled by Bloomberg.
Kenya will hold its presidential vote on March 4, the first since a disputed 2007 ballot sparked two months of violence in which more than 1,100 people died. The currency may decline to 89 a dollar by election day, according to a Bloomberg survey of analysts and traders last month.
“The weakening of the shilling is due to dollar demand by businesses for their end-month obligations,” John Muli, a dealer at Nairobi-based African Banking Corp., said in a phone interview. “With the elections coming up, we expect subdued trading”
The Central Bank of Kenya offered 10 billion shillings ($114 million) of bids for nine-day repurchase agreements and term-auction deposits today, according to a central bank official who asked not to be identified in line with policy. It sold nine-day repos rather than the usual seven-day securities because of the election date, the official said. The bank uses the repos and TADs to reduce money supply and support the shilling.
The shilling will trade in a range between 87.05 per dollar to 87.45 per dollar, Nairobi-based NIC Bank Ltd. (NICB) said in a note today.
Uganda’s currency traded unchanged at 2,645 per dollar, while the Tanzanian shilling gained for a second day, appreciating 0.2 percent to 1,630 per dollar.
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