Kenya’s shilling snapped a six-day rally as companies with overseas shareholders demanded dollars for dividend payments.
The currency of East Africa’s biggest economy depreciated as much as 0.4 percent to 84.95 per dollar and was trading 0.1 percent weaker at 84.70 by 4:30 p.m., the first drop since May 31, according to data compiled by Bloomberg.
“The shilling is under pressure due to on-going dividend payments by businesses with non-resident investors which has occasioned increased demand for dollar,” Finance Minister Robinson Githae told reporters today in Nairobi. “The falling yields on government securities have also put off investors seeking higher returns,” he added.
Kenya’s six-month and three-month borrowing costs both rose for the first time in almost five months at auctions this week.
“We expect the shilling to stabilise as the payment period comes to an end in the next few weeks hence lowering demand for the dollar and with yields on the rise we expect investors to return,” Githae said.
Kenya accepted 2 billion shillings ($23.5 million) of 2.4 billion shillings in bids received for term-auction deposits at a weighted average rate of 18 percent, a central bank official said.
Kenya’s central bank introduced “longer tenor Term Auction Deposits as an additional instrument for liquidity management,” it said in in its monetary policy committee statement on June 5. The central bank retained its benchmark rate at a record-high 18 percent in its monetary policy committee meeting on June 5, holding it for a sixth month.
The Ugandan shilling depreciated 0.2 percent to 2,485 per dollar today, while Tanzania’s shilling weakened 0.4 percent to 1,596.50 per dollar.