Markets & Finance

Shilling racks up gains ahead of bond auction

Econ-Sh-2010

The Kenyan shilling is seen as vulnerable in the coming week following a sharp fall in government debt yields. PHOTO | FILE |

The Kenyan shilling strengthened further on Wednesday, with the local currency supported by dollar inflows to be used for purchase of Kenya's
high-yielding government debt later in the day.

Commercial banks posted the shilling at 102.10/20 to the dollar, from Monday's close of 102.40/102.50.

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 Wednesday'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.

Good inflows

"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 percent, far above what Kenya usually pays for short-term debt.

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.