Kenyan shilling weakens on energy sector dollar orders

The Kenyan shilling weakened on Tuesday, weighed down by energy sector importers buying dollars on the view that the local currency's gains have bottomed out.

At 0728 GMT, commercial banks quoted the shilling at 84.00/20 per dollar, 0.2 per cent weaker than Monday's close of 83.85/95.

"There is some demand from the energy guys. They feel that the shilling had been at 83.90 for so long and it may have run out of gains," said Julius Kiriinya, a trader at African Banking Corporation.

He said dollar inflows from tea exports later in the session could however offer support to the shilling.

Tea is Kenya's leading foreign currency earner and is sold in the port city of Mombasa every Monday and Tuesday. Exporters typically then convert their dollar earnings into shillings to pay farmers and cover operational expenses.

Technical charts showed shilling support at 84.20. The local currency is 2.4 per cent stronger so far this year.

Some traders also expect the shilling to get support in coming days from foreign investors selling dollars to buy into local debt securities.

The central bank will auction Sh10 billion worth of the 20-year bonds on Wednesday. It also plans to sell 10 billion shillings worth of Treasury bills this week.

READ: Kenya to sell 20-year bond worth Sh10bn in May

Kenyan debt securities have received increased foreign investor interest after a peaceful presidential election in March coupled with a stable currency and low inflation rate.

READ: Foreign investor inflows seen supporting shilling

"Shilling-denominated assets continue to offer better returns as compared to the near zero rates currently offered in the developed world," said Kenneth Karuga, a senior economist at Commercial Bank of Africa.