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Kenyan Shilling Falls to Lowest in Four Months on Risk Aversion

Kenya’s shilling retreated, heading for its lowest level in more than four months, after risk-averse investors bought dollars and yields on local debt fell.

The currency of East Africa’s biggest economy depreciated as much as 0.5 percent and traded 0.1 percent weaker at 84.38 per dollar by 2:30 p.m. in Nairobi, the lowest since Jan 30.

“The shilling is under sustained pressure largely due to the unresolved euro crisis and preference for safer assets,” Bernard Matimu, chief dealer at Nairobi based NIC Bank Ltd., said in a phone interview today.

The euro has lost 3.5 percent against the U.S. dollar this month and almost $4 trillion has been wiped from equity markets amid concerns over Greece. German Finance Minister Wolfgang Schaeuble said on May 18, the turmoil could last another two years.

Kenya has lowered its local borrowing target to 62.1 billion shillings ($735 million) from 119.5 billion shillings for the fiscal year ending June 30, replacing shilling-denominated financing with a $600 million syndicated loan arranged by Citigroup Inc., South Africa’s Standard Bank Group Ltd. and London-based Standard Chartered Plc.

Kenya’s three- and six-month yields fell for the 18th straight week after the government halved borrowing. The yield on 91-day Treasury bills declined to 10.075 percent at a sale May 17 from 20.799 percent tagged on similar-maturity debt sold Jan 12. On 182-day bills, borrowing costs slid to 12.078 percent on May 16 from 20.914 percent realized on Jan 23, according to the central bank’s website.

Repo Auctions

Kenya’s central bank accepted 5.5 billion shillings of bids for repurchase agreements at a weighted average rate of 17.636 percent after offering 10 billion shillings of the securities, a Kenyan central bank official, who declined to be identified in line with policy, commented in a phone interview today from Nairobi, the capital. The central bank has withdrawn 40.8 billion shillings through repo auctions since May 2, according to data compiled by Bloomberg.

Tanzania’s shilling rose 0.1 percent to 1,583.50 per dollar, while the Ugandan shilling appreciated 0.2 percent to 2,469 per dollar.

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