Kenyan shilling weakens vs dollar

NAIROBI: The Kenyan shilling reversed earlier gains against the dollar on Friday weighed by banks buying greenbacks to square their positions ahead of the weekend, while stocks halted a two-day fall.

Traders said the shilling had firmed in early trade helped by improving risk appetite in frontier markets after euro zone leaders announced a new bailout for Greece.

The shilling was supported by gains in the euro, which rose for a second day on Europe's deal to support Greece and other heavily indebted countries in the euro zone.

At the market's close, commercial banks quoted the shilling at 90.15/35, weaker than Thursday's close of 89.90/90.00. It had touched 89.75/85 in early trade.

"At some point there was a bit of customer activity and that triggered a bit of short covering and that has pushed it up (weaker)," said Duncan Kinuthia, a trader at Commercial Bank of Africa.

"We've not seen a lot of customers buying...it was mostly inter bank buying (dollars)."

Typically, when the euro strengthens against the dollar, it boosts the shilling as risk appetite improves, encouraging investors to buy into emerging market assets.

"There was some gain on the shilling at the open on the back of a stronger euro and other offshore currencies after details of the Greece bailout came out," said Dickson Magecha, a trader at Standard Chartered Bank.

Traders said they expected the shilling to trade in the 89.50-90.50 range next week.

"Going forward, we expect the shilling to remain hemmed within a tight range as the market remains evenly balanced," Bank of Africa said in a daily report to clients.

"However, continued strong gains in the euro internationally could support the shilling."

At the Nairobi Stock Exchange, the benchmark NSE-20 Share index edged up 0.55 percent to 3,777.41 points helped by bargain hunters buying shares ahead of half year financial results announcements by most companies.

"It's a bear rally. It (the index) has gone low enough for bargain hunters to buy stocks," said Johnson Nderi, an analyst at Suntra Investment Bank.

The index touched 3,746.00 points last week, the lowest it has been during the year-to-date.

Shares in Kenya's largest telecom operator, Safaricom rose 2.82 percent to 3.65 shillings a share, while NIC Bank rose 2.58 percent to 39.75 shillings.

Corporate and government bonds worth 2.517 billion shillings ($28.0 million) were traded, more than double the 1.01 billion shillings traded on Thursday.

Copyright Reuters, 2011