Kenya’s shilling weakened the most in more than a week as the central bank injected money into the market by buying foreign exchange to boost its reserves.
The currency of East Africa’s biggest economy depreciated as much as 0.2 percent, the most on a closing basis since April 2, to 83.25 per dollar and traded at 83.10 as of 12:54 p.m. in Nairobi.
“The money market liquidity improved” during the week ended April 4, supported by government payments and foreign exchange purchases by the central bank from the interbank market, the Central Bank of Kenya said in its weekly bulletin on April 5. The average interbank rate declined to 19.89 percent from 23.13 percent in the previous week “reflecting increased money market liquidity,” the bank said.
The monetary policy committee retained the central bank rate at 18 percent on April 4 to ensure that inflation continues to decline toward the government target while maintaining exchange rate stability.
The bank will offer 5 billion shillings ($60 million) of seven-day repurchase agreements today, Godfrey Putunoi, an official at the bank, said by phone.
“The increased money supply has forced the central bank to come in and remove money from the market, a situation that is likely to support the shilling in the short term,” Duncan Kinuthia, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview today.
The inflation rate declined for a fourth month to 15.61 percent in March from 16.69 percent in the previous month, the Kenya National Bureau of Statistics said last month.
The Ugandan shilling weakened the most in more than a week, depreciating 0.6 percent to 2,495 to the dollar. A close at this level will be the lowest since April 2. Tanzania’s shilling remained unchanged at 1,584 per dollar.