Shilling remains at lows after lending rate change
The shilling strengthened to around the 100 level when trading began at 0600, but traders looking to buy dollars at a better rate quickly caused the shilling to weaken. PHOTO | FILE
The shilling ended modestly stronger on Wednesday, while the benchmark share index slipped after the central bank announced a surprise rate hike on Tuesday.
At 1330 GMT, the shilling was at 100.35/45 to the dollar, compared with 100.55/65 on Tuesday before the Monetary Policy Committee (MPC) hiked rates to 11.50 per cent from 10.00 per cent, the second 150 basis point rise in about a month.
"There was a bit of a knee-jerk reaction in the morning and the shilling strengthened a little bit," said one senior trader, saying it climbed to less than 100 to the dollar. "But at below 100, everyone was interested to buy (dollars)."
Another foreign exchange trader noted the global strength of the dollar, which was hurting other emerging market currencies, meant the shilling could struggle to hold gains.
The shilling has been under sustained pressure, plunging to fresh 3-1/2 year lows and heading towards an all-time low around 107, on the back of falling tourism revenues, a widening current account deficit and the rising dollar.
The benchmark NSE 20 index slipped 52.41 points to close at 4,726.87 points.
"We have seen a lot more retail clients selling their positions," said Daniel Kuyoh, a research analyst at Kingdom Securities. "They are reacting to the MPC rate rise and a lot of them will be looking for cash."
On the secondary market, government bonds valued at Sh856.9 million ($8.54 million) were traded, compared with Sh366.9 million shillings in the previous session.
