Kenya Shilling Weakens Second Day on Concern of Crude Prices
Kenya’s shilling weakened for a second day, touching the lowest in two months, on concern rising global oil prices would require more dollars to place orders.
The currency of East Africa’s biggest economy depreciated 0.1 percent to close at 83.33 per dollar, having weakened as much as 0.3 percent to 83.50, the lowest since Feb 9.
Oil prices rose for a second day after fuel stockpiles declined more than expected in the U.S. Crude for May delivery rose $1.18, or 1.1 percent, to $103.88 a barrel at 11:01 a.m. on the New York Mercantile Exchange. Prices are up 5.1 percent this year. Kenya imports almost all the fuel products it consumes.
“The shilling is weakening due to pent up dollar demand from the oil importers who are likely to spend more in importing as global prices are expected to surge,” Duncan Kinuthia, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview today.
The Central bank of Kenya received bids of 10.1 billion shillings for a 7-days repurchase agreement and accepted 5 billion shillings ($60 million) for seven-day repurchase agreements at a weighted average rate of 15.54 percent, Godfrey Putunoi, a bank official, said by phone today from the capital.
The bank has removed a total of 24.6 billion shillings from the market since April 5, after the monetary policy committee indicated it would intervene to curb volatility.
“The failure of the shilling to respond to the mop-up exercise by the central bank is an indicator of the pent-up demand in the market, which will keep pressure on the shilling going forward,” Kinuthia said.
The inflation rate declined for a fourth month to 15.61 percent in March from 16.69 percent in February, the Kenya National Bureau of Statistics said last month.
Rising oil prices are a risk to the inflation outlook, central bank Governor Njuguna Ndung’u said on March 6.
Tanzania’s shilling appreciated on minimal dollar demand. The currency of the second-biggest economy in East Africa gained as much as 0.4 percent to close at 1,584 per dollar after trading 0.6 higher at 1,580, the strongest since Jan 13.
“There is very little demand coming in from small and medium enterprises today seeking dollars,” Fred Siwale, a dealer with CRDB Bank Plc, said today by phone from Dar es Salaam, the commercial capital.
The Ugandan shilling weakened for a second day, on increased dollar demand in the interbank market. The currency of the third-biggest economy in East Africa depreciated 0.4 percent to close at 2,514 to the dollar.
“The shilling has lost ground on account of interbank buying of the dollar,” Peter Mbowa, a currency trader at Kenya Commercial Bank Ltd. (KNCB)’s Ugandan unit, said by phone from Kampala.
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