NAIROBI: The Kenyan shilling recovered its early losses against the US dollar on Tuesday helped by offshore interest in a one-year Treasury bond auction, while shares were barely changed.
High yields on government securities have fuelled foreign demand, especially for short-dated papers, bringing dollars into the country and leading to high subscription rates.
The government will auction 10 billion shillings of one-year bonds on Wednesday.
At the 1300 GMT close of trade, banks posted the shilling at 82.95/83.15 against the dollar, up from an intraday low of 83.60/80, and 0.4 percent stronger than Monday's close of 83.25/45.
The earlier fall was due to dollar demand from the energy sector.
"Traders seem to have decided to sell dollars once the order was fulfilled. Yield hunters are also in the market at these levels selling dollars as they seek to lock in high rates on government securities," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
The Central Bank of Kenya, which has stayed out of the repo market since Feb. 10 after mopping up a total of 40.33 billion shillings this year, said it would hold its next policy setting meeting on March 6.
Policymakers held the benchmark rate at 18 percent in two consecutive sittings this year, after raising it aggressively in the last quarter of 2011 to fight high inflation and volatility in the exchange rate.
Traders said the shilling was set for further gains as farm sector exporters convert their earnings into shillings later this week.
"We should see some dollar selling interest from exporters, particularly from tea and horticulture sectors," said Robert Gatobu, a trader at Bank of Africa.
At the Nairobi Securities Exchange, the benchmark NSE-20 Share Index eked out a 0.2 percent gain to close at 3,183.01 points, as the market waited for more firms to post their full year results.
Shares in East African Breweries, the region's biggest brewer, led the gains by adding 2.8 percent to 183 shillings a share, buoyed by investors who are reacting to a 9 percent climb in its half-year earnings.
Mortgage lender Housing Finance is scheduled to unveil its full year earnings at an investor briefing before the market opens on Wednesday.
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