Jan. 11 (Bloomberg) -- Kenya’s shilling declined for a third week as the central bank slashed its benchmark interest rate more than expected.
The currency of East Africa’s biggest economy was unchanged at 86.70 per dollar as of 4:38 p.m. in Nairobi, leaving it down 0.5 percent in the week, the biggest retreat since the five days ended Nov. 23, according to data compiled by Bloomberg.
The Monetary Policy Committee, led by central bank Governor Njuguna Ndung’u, reduced the rate for the fourth time since July, cutting it to 9.5 percent from 11 percent, the Nairobi-based Central Bank of Kenya said in an e-mailed statement yesterday. Seven out of 10 economists and analysts surveyed by Bloomberg had forecast a 1 percentage-point reduction.
“The shilling has been under pressure on expectation of the rate cut and with the rate slashed more than the market expected, it will remain under pressure,” Jeremiah Kendagor, head of trading at Nairobi-based Kenya Commercial Bank Ltd., said by telephone. “Demand for dollars will rise on lower borrowing charge with the shilling expected to hit 87 range in the coming days.”
The monetary authority has lowered its lending rate by 7 percentage points since July to stimulate economic growth, which slowed to 3.4 percent in the first quarter and 3.3 percent in the second. Expansion quickened to 4.7 percent in the third quarter.
The central bank took 2 billion shillings ($23 million) of seven-day repurchase agreements, out of bids of 2.6 billion shillings received, a bank official who asked not to be identified in line with policy, said by phone today. The repos are used by the regulator to withdraw money supply from banks and support the shilling.
The Ugandan shilling appreciated 0.8 percent to 2,678 a dollar, leaving it 1.4 percent up in the week, while Tanzania’s shilling gained 1.2 percent to 1,589.50 a dollar, giving it a weekly rally of 0.2 percent.
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