Kenyan shilling weakens against dollar, shares rise
20 August 2014, 10:52
Nairobi - The Kenyan shilling
weakened on Tuesday, hurt by dollar demand from the banking, oil
and telecoms sectors, while shares rose.
At the close of trade, commercial banks quoted the shilling
at 88.35/88.45 to the dollar, down from Monday's close of
Traders said banks were buying the dollar to cover their
"The shilling has been weakening rapidly at a time when
there is tight liquidity in the market," said Nahashon Mungai, a
trader at Kenya Commercial Bank.
"If we break the 88.50 level to the dollar, the next level
would be 89. There is a bias for weakening, unless the central
bank intervenes," he said.
The shilling, down about 2.3 percent against the dollar this
year, has been weakening over the past few weeks.
Some traders said the government had delayed the release of
funds to departments and local authorities, causing a tightening
of the money market.
Traders also said dollar inflows had been scant. Foreign earnings from Kenya's weekly tea auction have fallen due to
over-production which has kept tea prices subdued this year.
Tourism earnings have also fallen to a trickle, largely
after some Western nations warned their citizens against
travelling to parts of Kenya following attacks by Islamist
Traders are now looking to see whether the central bank will
intervene to prop up the local currency.
"The last time we traded at 82.25/35 levels, the central
bank came in and intervened. So the question is, will they
intervene, considering the slow pace of depreciation?" said one
trader at a commercial bank in Nairobi.
He said oil and telecoms companies were adjusting to a
weaker shilling and coming in to buy dollars instead of waiting
to see if the local currency would firm.
The weighted average lending rate on the interbank market
rose to 12.1919 percent on Monday from about 7.5 percent in
mid-July. Traders forecast the shilling was likely to reach
88.50 once the liquidity crunch eased.
On the stock exchange, shares recovered to push the
benchmark NSE-20 share index 0.6 percent or 29.57
points higher, to 5,070.13 points.
British American Tobacco Kenya hauled the market
up, rising 9 percent to 799 shillings a share.
"It was a fund manager disposing their stock, although it is
still not clear why," said Agnes Achieng, research analyst at
Sterling Investment Bank.
The firm, a unit of London-listed British American Tobacco
, last month reported a 14 percent jump in first-half
pretax profit, thanks to higher revenue from contracts to
manufacture cigarettes for other companies.
An investment banker who declined to be named said the BAT
shares could have been taken up by a long-term investor.
"BAT is one of the highest-dividend payout stocks, it's a
good investment for the likes of pension funds," he said.
In the debt market, bonds worth 2.9 billion shillings
($32.84 million) were traded, down from 4.8 billion shillings on
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