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Kenyan shilling strengthens from three-year low, stocks fall

11 November 2014, 08:33

Nairobi - The Kenyan shilling strengthened from a three-year low after the central bank mopped up liquidity on Monday while the main stock market index edged lower.   

The shilling closed at 89.75/85 to the dollar, a touch stronger than Friday's close of 89.85/95, which was its weakest level since December 2011.

The central bank sought to mop up 20 billion shillings ($222.97 million) in excess liquidity, using repurchase agreements and term auction deposits.

"This mopping up ... has propped up the shilling slightly," I&M Bank trader Eric Gathecha said.

The central bank has regularly drained excess liquidity from the money markets in recent months, making it relatively costlier to hold on to long dollar positions, which in turn helps to strengthen the shilling.

Another trader said that expected inflows of hard currency from a regional lender into Kenya's micro-finance sector had also helped the shilling.

The shilling has weakened about 4.1 percent against the dollar this year, mainly because of a slump in inflows from tourism since Al Shabaab attacks this year.

Inflows of dollars from tea exports have also dwindled, hit by weaker prices caused by a global glut of the commodity.

Last month the central bank also supported the currency by selling dollars when the shilling reached the 89.50 mark.

Most traders said they expect the bank to do the same if she shilling breaks past the 90 level against the dollar.

In the stock market, the blue-chip NSE-20 index inched down 0.3 percent to 5,074.93 points. Among the losers were Kenya Power, which shed 3 percent to 15.75 shillings per share, while Standard Chartered Bank of Kenya fell 1.2 percent to 331 shillings.

"Foreigners see a weak shilling and have accelarated their profit-taking to avoid further losses on the shares they hold," said Silha Rasugu, a research analyst at Ghengis Capital.

Foreign buyers make up about 58 percent of market participants on a daily basis, he said.   

In the debt market, bonds worth 2 billion shillings ($22.28 million) were traded, slightly up from the previous day's 1.9 billion. 

- Reuters

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