The shilling strengthened further with the local currency supported by dollar inflows to be used for purchase of Kenya’s high-yielding government debt later in the day.
In early trade, commercial banks posted the shilling at Sh102.10/20 to the dollar, from Monday’s close of Sh102.40/102.50. Tuesday was a public holiday in Kenya.
The currency, down about 14 per cent against the dollar this year, was receiving support from inflows ahead of yesterday’s auction of an amortised one-year Treasury bond, and more broadly from its weekly Treasury bills auctions, said a trader at one Nairobi-based commercial bank.
“There’s been really good inflows coming in, chasing the yields,” the trader said. Going forward, the trader said the local currency remains on a strengthening trend In recent weeks traders have reported growing dollar inflows from foreign investors who have been attracted by interest rates on government Treasury bills of more than 20 per cent, far above what Kenya usually pays for short-term debt.
The increase in rate follows recent adjustment made by the Central Bank. It hiked its benchmark interest rate by 300 basis points this year to support the shilling which has made government borrowing on the local markets more costly. The shilling has weakened consistently over the last year due to a decline in tourism, a major foreign currency earner, and a high current accounts deficit. —Reuters
