NAIROBI – The Kenyan shilling was barely changed against the dollar on Monday as market participants awaited a decision on rates during the next session, while the benchmark shares index edged up.
Policymakers are scheduled to meet to set rates on Tuesday and eight out of 10 analysts polled by Reuters expect them to hold the Central Bank Rate (CBR) at 18 percent for the sixth month in a row.
At the 1300 GMT close of trade, commercial banks posted the shilling at 85.90/86.10 to the dollar, barely moved from Thursday’s close of 86.00/20. Markets were closed on Friday for a national holiday.
“Clients were unsure where the shilling is going ahead of MPC, so they were closing their orders,” said Jeremiah Kendagor, head of trading at Kenya Commercial Bank.
Unlike last year when slowness to act by the central bank caused the shilling to tumble against the dollar, officials seem determined to keep the currency stable to keep costs of essential imports like oil under control.
Besides the high lending rates, the central bank has been proactive in the market, regularly mopping up excess liquidity from the market and injecting dollars when demand surges.
During Monday’s session, it sought to mop up 19 billion shillings through repurchase agreements, the highest such offer in a single day this year.
It received bids worth 9.27 billion shillings and accepted them all at a weighted average rate of 17.6 percent.
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Policymakers adopted an ultra-hawkish stance late last year after the shilling fell by more than a quarter to 107 per dollar in October, helping to drive year-on-year inflation to a peak of almost 20 percent in November and causing widespread anger.
Inflation fell to 12.22 percent in May from 13.06 percent in the previous month. But a bout of currency weakness last week, when the shilling fell to 87.80 against the dollar on Thursday, a level last traded on January 12, muddled up the prospect for a rate cut.
“The market was geared for a cut but now its 50-50 because of fear of currency risk,” said Dickson Magecha, a trader at Standard Chartered.
At the stock market, the benchmark NSE-20 share index edged up by 0.07 percent to close at 3,653.29 points.
Traders said activity had been subdued due to a bank holiday in Britain, a base for many foreign investors at the Kenyan bourse.
Traded volumes tumbled to 17 million shares from 72 million traded in the previous session, with activity concentrated on banking and telecom shares like Kenya Commercial Bank and Safaricom.
In the debt market, bonds worth 1.67 billion shillings were traded, with yields unchanged across the curve, ahead of the rate-setting meeting of the central bank scheduled for Tuesday.
