June 14 (Bloomberg) -- Kenya’s shilling strengthened for a second day as the country’s central bank extended its policy of tighter money supply.
The currency of East Africa’s biggest economy appreciated as much as 0.6 percent before paring its gain to 0.1 percent at 85.20 per dollar by 4:07 p.m.
Kenya’s central bank accepted 480 million shillings ($5.6 million) in bids for 14- and 28-day term auction deposits at 18 percent, an official, who declined to be named in line with policy, said by phone from Nairobi. The bank has mopped up 21.05 billion shillings from June 6, when it started selling TADs, according to data compiled by Bloomberg.
“The shilling gain is helped by central bank moves to tighten supply as commercial banks trimmed long dollar positions,” Nairobi-based NIC Bank Ltd. said in a note to clients.
The central bank introduced longer tenor term auction deposits as an additional instrument for liquidity management, it said in its monetary policy committee statement June 5.
“The Central Bank, which has been mopping up liquidity since April 5 and moved to introduce longer tenure repurchase agreements last week, could see the shilling trade in the 84.80 to 85.80 range for the rest of this week,” the note said.
Term-auction deposits in Kenya are different from repurchase agreements as their maturity is longer -- 14, 21 and 28 days -- and are paid back with interest rather than being sold at a discounted yield, according to a research note from Nairobi-based Sterling Capital Ltd e-mailed June 12.
Tanzania’s shilling gained 0.1 percent to 1,582 per dollar, while the Ugandan shilling weakened for a second day to 0.6 percent to 2,505 per dollar.
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