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Kenya Shilling Posts First Quarterly Gain in Four After Election

Kenya’s shilling strengthened on reduced dollar demand before the Easter weekend to post its first quarterly gain in four amid Uhuru Kenyatta’s election victory.

The currency of East Africa’s biggest economy advanced as much as 0.4 percent to 85.25 per dollar, its best intraday level since March 15, and was trading at 85.43 by 4:11 p.m. in Nairobi, the capital. The shilling has increased 0.8 percent this quarter, the third-best performer in Africa after the Ugandan and Somali currencies.

While outgoing Prime Minister Raila Odinga is challenging Kenyatta’s win of the March 4 presidential elections, the vote went without the widespread violence that followed the 2007 poll in which more than 1,100 people died. The Supreme Court, the nation’s highest, will on March 30 rule whether Kenyatta was validly elected.

The shilling was supported by “investors who sold dollars in anticipation of a speedy resolution of the petition challenging the presidential election results,” Nairobi-based African Banking Corp. analysts, including Joel Mbuvi, the head of treasury, said in an e-mailed note to clients today. “We expect the shilling to strengthen.”

The Central Bank of Kenya has been buoying the shilling by removing money from the market using repurchase agreements and term auction deposits. It received bids amounting to 8.2 billion shillings ($95.7 million) in repurchase agreements and accepted 7.6 billion shillings at an auction today. The bank also accepted all 9.43 billion shillings worth of term-auction deposits, an official who asked not to be identified in line with policy, said by phone today.

Pending Weakness

The currency may fall to 89 per dollar by the end of the year, according to three of six estimates in a survey of analysts and traders by Bloomberg News. The other predictions were for a drop to 88. A surge in imports to fuel an economy the International Monetary Fund estimates will expand as much as 6 percent this year may hurt the currency as the deficit on the current account widens, according to Citigroup Inc.

Uganda’s currency strengthened 0.3 percent to 2,590 per dollar, the fourth day of gains, while the Tanzanian shilling dropped 0.2 percent to 1,617 per dollar, the second day of losses.

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