Kenya’s shilling snapped a four-day losing streak against the dollar as the central bank drained more cash from the market and short-term interest rates rose.
The currency of East Africa’s largest economy gained as much as 0.5 percent and was unchanged at 87.56 per dollar by 5:24 p.m. in Nairobi, the capital.
The central bank accepted all 2.6 billion shillings ($30 million) of bids for seven-day repurchase agreements, fewer than the 5 billion shillings for sale, said an official, who also asked not to be identified in line with policy. The bank regularly uses its open-market operations to reduce total money supply in a bid to support the shilling.
“The central bank is steadily taking money out of circulation,” Mwambu Malamba, a senior dealer with Commercial Bank Africa Ltd., said by phone from Nairobi. “Like goods, when the supply is limited the price goes up,” Malamba said.
Short-term interest rates are rising as the central bank manages liquidity almost daily, Joel Mbuvi, head of treasury for Nairobi-based ABC Bank Ltd., said by phone.
The rate banks charge each other for lending increased to 7.8 percent yesterday from 6.7 percent by Jan. 30, according to the Central Bank of Kenya’s website. The yield on 182-day government debt jumped to 8.45 percent at an auction yesterday compared with 8.07 percent at the previous sale, while the rate on three-month debt increased to 8.23 percent at a sale today from 8.16 percent, according to the bank.
“We’ve seen that the short-term interest rates are going up a bit, helping strengthen the shilling,” Mbuvi said.
Uganda’s currency climbed 0.2 percent to 2,651 per dollar, while the Tanzanian shilling gained 0.1 percent to 1,615.