Kenya’s Shilling Steady While Shares Inch Up

Kenya’s shilling hovered below the 88 per dollar level on Thursday with market participants reluctant to push the currency to weaker levels.  This is after the central bank signalled its intent to stem volatility.  The Nairobi Securities Exchange’s main NSE-20 Share-Index closed up 0.2 per cent.

At the 1300 GMT close of trade, commercial banks quoted the shilling at 87.75/85 to the dollar, a touch firmer compared with Wednesday’s close of 87.80/90.  The Central Bank of Kenya sold dollars on Friday after the shilling weakened above 88 and on Monday said it had ample foreign reserves to curb volatility after the shilling lost ground steadily during the first three weeks of May.

The bank’s aggressive stance has for now halted the shilling’s decline, due in part to market nerves following a series of bombings in the capital and the east African economy’s main port city.  “Market players are very aware of central bank intervention.  So I think players will be a bit cautious,” said Andlip Nazir, senior trader at I&M Bank.

Nazir added the shilling might even firm slightly as end-month dollar demand from corporate clients tapers off.  Njuguna Ndung’u, the central bank’s governor, said on Monday that proceeds from a planned debut Eurobond before the close of the fiscal year on June 30 would raise foreign exchange reserves and help to support the shilling.

The NSE-20 Share Index added 9.85 points to close at 4,895.13 points.  Equity Bank, which plans to launch a mobile financial service in July, rose 1.9 per cent to close at 41.00 shillings a share.  Kenya has led the world in mobile money, with the M-Pesa platform of its largest telecoms operator Safaricom offering banks a cheap and easy way to reach the large number of people without access to formal financial services.

“We have seen a lot of activity from locals who actually have taken the news very positively. The locals actually know what this means to the market,” Moses Waireri, head of research at Sterling Investment Bank, said.  On the secondary debt market, government bonds valued at 1.32 billion shillings were traded, compared with Wednesday’s 2.61 billion shillings.

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