Shilling gains further on foreign investor inflows

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"We've seen huge interest in the government securities from offshore investors," said a trader at one Nairobi-based commercial bank.
The currency, down about 14 percent against the dollar in 2015, has weakened consistently over the last year due to a decline in tourism, a major foreign currency earner, and a high current account deficit.

The Kenyan shilling strengthened further on Thursday on a steady inflow of dollars to be used for buying the country's high-yielding government debt.

Commercial banks posted the shilling at 101.80/102.00 to the dollar, tightening up from Thursday's close of 102.00/10.

"We've seen huge interest in the government securities from offshore investors," said a trader at one Nairobi-based commercial bank.

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.

At the weekly Treasury bill auction on Wednesday, the yield on the 364-day bill jumped to 22.363 percent from 21.882 percent a week ago, while that on the six-month bill jumped to 22.291 percent from 21.840 percent.

Weakened consistently

The currency, down about 14 percent against the dollar in 2015, has weakened consistently over the last year due to a decline in tourism, a major foreign currency earner, and a high current account deficit.

A second trader said a move on Wednesday by Kenya's central bank to inject 10 billion shillings ($98 million) into the money markets through a reverse repurchase program did not have a major impact on the level of the shilling.

The reverse repo is the first since August last year and runs contrary to the central bank's current monetary tightening stance. It did not post results of the offer immediately.