NAIROBI: Kenya's shilling weakened to a three-year low on Monday as telecom and manufacturing companies bought dollars to settle their bills by year end. Stocks ended higher.
The shilling fell to its lowest level since Nov. 2011 to close at 90.70/80 against the dollar in thin trading, weaker than the Dec. 24 close of 90.55/65 to the dollar.
Kenyan markets were closed last week for the Christmas and Boxing Day holidays.
"I assume these are deferred orders to pay suppliers that have to be paid by year-end," said a trader at a major Kenyan bank who declined to be named, referring to dollar buying by the telecom and manufacturing sectors.
The shilling had weakened to around three-year lows prior to Christmas, due in part to dollar demand from importers and falling tourist numbers - another key source of hard currency inflows for east Africa's biggest economy - following a number of Islamist attacks in the country.
On the Nairobi Securities Exchange, the main NSE-20 Share Index rose 1.6 percent to close at 5,049.19 points in turnover about a third of the market's usual trading volume.
Maureen Kirigua, an analyst at Sterling Investment Bank, said the market was driven by investors who were booking profits on stocks that had made significant gains over the past year before the introduction of a capital gains tax on Jan. 1.
"Most investors want to lock in what they have," she said.
Banking stocks had a strong showing on the day, reflecting the appetite by investors in a sector that has seen a surge in profits this year and is expected to remain buoyant next year driven by steady interest rates and an expanding economy.
On the debt market, government bonds worth 363.1 million shillings ($4 million) were traded, down from 2.57 billion shillings last week.
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