Kenya’s shilling slid the most in a week as the central bank accepted fewer bids than it was offered for repurchase agreements.
The currency of East Africa’s largest economy retreated 0.2 percent to 85.45 a dollar at 5:12 p.m. in Nairobi, the capital, the biggest one-day drop since Nov. 2.
The central bank accepted 3 billion shillings ($35 million) of seven-day repurchase agreements out of bids of 19.65 billion shillings, an official, who declined to be identified in line with policy, said by phone today. Yesterday the bank sold 3.2 billion shillings of 3-month bills, having received bids of 13.4 billion for its offer of 3 billion shillings.
“There is improved liquidity in the market putting the shilling under pressure as the central bank rejected a substantial amount of bids,” Duncan Kinuthia, head of trading at Commercial Bank of Africa Ltd., said by phone.
In a repurchase agreement an investor agrees to sell a security to another trader and to buy it back at a future date and at a pre-determined price. The central bank has been offering repos to control money supply in the market.
The central bank’s Monetary Policy Committee, led by Governor Njuguna Ndung’u, lowered the benchmark interest rate by 2 percentage points to 11 percent on Nov 7. The economy grew 3.3 percent between April and June, the slowest pace in 10 quarters, as record interest rates stifled lending and Europe’s debt crisis undermined tea and flower exports.
Uganda’s shilling weakened for a fifth day, depreciating 0.2 percent to 2,598.5 a dollar, while the Tanzanian shilling traded unchanged at 1,591 a dollar.