NAIROBI: The Kenyan shilling bounced from near three-year lows on Thursday after the Central Bank of Kenya (CBK) sold an unspecified amount of dollars into the foreign exchange market. Stocks inched higher.
However, traders said the shilling, which has lost 2.6 percent to the dollar so far this year, remained under pressure from importers seeking dollars and was likely to weaken again in the face of a shortage of hard currency inflows.
The shilling closed at 88.90/89.00 to the dollar, a level it traded at last week. Earlier in the session, the shilling hit a low of 89.45/89.55, a level it last reached in December 2011.
"The central bank came in and sold dollars, not sure how much, but it was big for this kind of recovery," said a trader at a leading commercial bank.
The local currency of East Africa's biggest economy has been under pressure since last week due to dollar demand from importers, against scant hard currency inflows.
The central bank said in a statement that it was able to cope with any shocks to the economy after accumulating foreign exchange reserves totalling $7.4 billion - worth 4.85 months of import cover - over the past three weeks.
Three weeks ago the bank had reserves worth $6.3 billion, enough to cover 4.13 months of imports. The bank said the additional $1.1 billion was from receipts for Kenya's maiden sovereign bond issued in June.
"This gives the Central Bank and the economy a cushion to weather any shocks," the bank said.
Kenya's tea and tourism sectors, leading foreign exchange earners, have faced difficult times this year, causing a shortage of hard currency.
A global glut has hurt tea prices, while tourists have avoided the country because of frequent deadly attacks blamed on Islamists from neighbouring Somalia.
On the Nairobi Securities Exchange, the main NSE-20 Share Index inched up 0.3 percent or 13.77 points to close at 5,222.87 points.
The big gainers were Equity Bank, one of the most traded stocks on the bourse, which rose 5.8 percent to close at 54.50 shillings; and the demutualised Nairobi Securities Exchange, whose shares surged 8.05 percent to 23.50 shillings.
Agnes Achieng, research analyst at Sterling Investment Bank, said Equity shares were in demand due to its plans to launch its telecoms services arm soon to expand its market share in the fast-growing mobile phone-based financial services market.
Equity has teamed up with the country's second-largest telecoms firm, the local arm of Bharti Airtel, to roll out its new service.
"There is a lot of demand for the exchange's shares after the initial public offer was oversubscribed," said Achieng.
She said the appetite for the stock has kept its share price rising since it was listed and started trading on Sept. 9.
On the secondary market, bonds valued at 2.09 billion shillings ($23.5 million) were traded, up from 1.95 billion shillings on Wednesday.
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