Kenya Shilling Fluctuates on Higher Bond Bids, Election Concern

Kenya’s shilling swung between gains and losses as the central bank accepted more bids for securities offered at a sale and amid growing demand for dollars before next month’s elections.

The currency of East Africa’s biggest economy weakened less than 0.1 percent to trade at 87.60 per dollar by 12:51 p.m. in Nairobi, after gaining as much as 0.5 percent to 87.13 earlier, according to data compiled by Bloomberg.

The Central Bank of Kenya sold 25.5 billion shillings ($291 million) of 2-year and 15-year treasury bonds at an auction yesterday, more than the 15 billion shillings offered, after receiving bids of 44.8 billion shillings, the bank said in an e-mailed statement. Yields for the 2-year paper rose to 13.232 percent, while for the 15-year bond it rose to 14.081 percent, the central bank said.

“The rising yields on the treasury bonds have attracted dollar inflows with investors bidding higher, providing support to the shilling,” Solomon Alubala, head of trading at National Bank of Kenya Ltd., said by phone.

The shilling is likely to gain “marginally,” as foreign investors pay for bonds, Nairobi-based NIC Bank Ltd., said in a note today.

Kenya will hold its presidential vote on March 4, the first since a disputed 2007 ballot sparked two months of violence in which more than 1,100 people died. The currency may decline to 89 a dollar by voting day, according to a Bloomberg News survey of analysts and traders last month.

“The shilling is still under pressure due to political sentiments associated with the elections,” Alubala said.

Uganda’s currency weakened for a fifth day, the longest losing streak since Nov. 27, depreciating by 0.6 percent to 2,688 per dollar, while the Tanzanian shilling fell for the second day, weakening 1 percent to 1,637.85 per dollar, the lowest since December 2011, according to data compiled by Bloomberg.

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