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Kenya Shilling Gains for First Day in Four on Interest Rate Bets

Kenya’s shilling strengthened for the first time in four days on speculation that the central bank will hold the interest rate at a record high to meet inflation targets and support the exchange rate.

The currency of East Africa’s biggest economy appreciated 0.5 percent, the most in almost three weeks, to 83.10 per dollar as of 12:47 p.m. in Nairobi.

The Monetary Policy Committee, led by central bank Governor Njuguna Ndung’u, will leave the policy rate at 18 percent today, according to five of seven economists surveyed by Bloomberg.

Inflation slowed to 13.1 percent in April, the lowest level in almost a year, as the impact of last year’s drought eased and the central bank boosted interest rates six times. Still, the bank is targeting inflation of 9 percent by June. In neighboring Uganda, the central bank yesterday left its benchmark rate unchanged at 21 percent for a second month.

High interest rates in Kenya have supported the currency, which gained 28 percent against the dollar since October 11, when it hit 106.75, making it the best performer among more than 170 currencies tracked by Bloomberg.

Kenya is replacing some local borrowing with a syndicated loan arranged by Citigroup Inc., South Africa’s Standard Bank Group Ltd. and London-based Standard Chartered Plc.

“The committee is expected to retain the rate in support of the shilling and with indications that the deal for the $600 million syndicated loan is finalised, the reserves will be boosted further, allowing the central bank to intervene if and when required to keep the shilling within the desired levels,” Duncan Kinuthia, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview today.

The central bank offered 1.5 billion shillings ($18.5 million) for repurchase agreements and accepted all 1.2 shillings of bids made, at a weighted average of 17.833 percent, an official who declined to be named in line with policy said in a phone interview.

Tanzania’s shilling strengthened for the first time in three days, climbing 0.7 percent to 1,583 per dollar. The Ugandan shilling gained the most in almost three weeks, appreciating 1.4 percent to 2,464.5 per dollar.

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