Kenya’s shilling slid the most in a month on growing demand for dollars by businesses targeting year-end festivities.
The currency of East Africa’s largest economy retreated as much as 0.3 percent to 85.63 a dollar and traded less than 0.1 percent weaker at 85.40 by 4:01 p.m. in Nairobi, the capital, according to data compiled by Bloomberg.
“There is demand in the market for dollars as businesses prepare for the busy festive season ahead,” Duncan Kinuthia, head of trading at Nairobi-based Commercial Bank of Africa Ltd., said by phone.
Businesses are importing more products as they prepare for increased sales during the Christmas and year-end period. Christians account for 87 percent of the 38 million population, according to the CIA World Factbook.
“The shilling has come under pressure from businesses’ increased dollar demand and is expected to come under pressure as we approach year end due to increased imports,” Bernard Matimu, chief dealer at Nairobi-based NIC-Bank Ltd., said by phone. The currency will trade within the 86.50 to 87 range by the end of the year, he said.
The Central Bank of Kenya accepted 7.5 billion shillings ($87.8 million) of seven-day repurchase agreements, an official who declined to be identified in line with policy said by phone. The bank received bids of 31.69 billion shillings, having offered 7.5 billion shillings.
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.
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 0.4 percent to 2,603 a dollar, while the Tanzanian shilling depreciated less than 0.1 percent to 1,592 a dollar.