Kenya Shilling Weakens for Second Day on Rate-Cut Speculation
The currency of East Africa’s biggest economy depreciated 0.2 percent to close at 86.45 a dollar, the lowest since May 30, according to data compiled by Bloomberg. It had fallen to as weak as 86.65 earlier in Nairobi, the capital.
The Central Bank of Kenya’s Monetary Policy Committee, led by Governor Njuguna Ndung’u, will probably lower the main rate by 100 basis points, or 1 percentage point, to 10 percent it meets Jan. 10, according to the median forecast of five estimates in a Bloomberg survey of economists. Inflation slowed for a 13th month to 3.2 percent in December from 3.3 percent a month earlier, remaining below the government’s target of 5 percent, Nairobi-based Kenya Bureau of Statistics said Dec. 28.
“The shilling is under pressure due to an anticipated rate-cut decision,” Nairobi-based NIC Bank Ltd. (NICB) said in a note to its clients.
The central lowered the benchmark interest rate by 2 percentage points to 11 percent when it last convened on Nov. 7, bringing the rate by 7 percentage points since July to stimulate the economy. Growth picked up to 4.7 percent in the three months to September after dropping to 3.3 percent in the second quarter.
“The outlook is for a 50 to 100 basis-point cut as they seek to support the economy but with a keen eye not to put the shilling under further pressure,” Duncan Kinuthia, the head of trading at Commercial Bank of Africa Ltd., said by phone from Nairobi.
The central bank accepted a total of 14.3 billion shillings ($165 million) of seven-day repurchase agreements and term auction deposits, a bank official who asked not to be identified in line with policy, said by phone today.
The Ugandan shilling weakened 0.5 percent to close at 2,728.95 a dollar, declining for a third day. Tanzania’s shilling slid for a fourth day, losing less than 0.1 percent to close at 1,593 per dollar.
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