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Kenyan shilling steady, high debt yields support

28 August 2013, 15:14

Nairobi - The Kenyan shilling was steady on Wednesday, supported by foreign investors selling dollars to buy into high yielding local debt while end-month importer greenback demand subsided.

The shilling was posted at 87.60/70 per dollar at 0731 GMT, barely changed from Tuesday's close of 87.50/70.

"Good inflows are expected this week from foreign investors who are keen to purchase government short-term bills that are currently attracting good yields," said Bank of Africa in a daily note.

The shilling, which is down 1.7 percent this year, has been hemmed in the 87.30-87.80 range for nearly two weeks, underpinned by foreign investors buying into local debt to lock in the high yields on offer.

Yields on Kenyan debt rose steadily for eight straight weeks due to tight shilling supply in the market, but started falling at auctions last week after liquidity eased.

Traders said, however, that a stronger dollar globally could pressure the shilling in coming sessions.

Investors are moving out of risky emerging markets because of uncertainty over whether the United States will continue its massive stimulus programme and the possibility of military intervention in the Syrian crisis.

"I think when Syria is hit markets will play cautiously ... and that may impact the shilling," said a trader at one commercial bank.

- Reuters

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