Kenya’s shilling weakened for a second day this week as the central bank mopped up liquidity, tightening money supply.
The currency of East Africa’s largest economy depreciated 0.4 percent to 84.30 per dollar by 5 p.m. in Nairobi, the capital.
The Central Bank of Kenya has withdrawn 23 billion shillings ($273 million) since July 27 via open market operations, compared with 6 billion shillings from July 23 to July 26, according to data compiled by Bloomberg. The bank has mopped up 78 billion shillings since June 6 through term auction deposits alone, a newly-introduced liquidity management tool.
The longer-tenure term auction deposits “have enhanced the open market operations and stabilized the interbank rate around the central bank rate,” the monetary policy committee said in an e-mailed statement July 5. The rate banks charge each other for overnight lending is called the interbank rate, while the central bank rate is set by the MPC.
The bank today accepted all 2.1 billion shillings in bids for seven-day repurchase agreements at a weighted average yield of 10.467 percent, an official, who asked not to be identified in line with policy, said.
The Tanzanian shilling gained less than 0.1 percent, the first time in six days, to 1,585 per dollar. Uganda’s shilling weakened 0.4 percent, the highest since June 15 on a closing basis, to 2,490 per dollar.