NAIROBI: The Kenyan shilling firmed for the fourth straight session on Tuesday after data released the day showed a sharp rise in inflation in September.
By 0818 GMT, commercial banks quoted the shilling at 85.70/90 per dollar, stronger than Monday's close of 86.00/20.
Year-on-year inflation spiked to 8.29 percent in September, from 6.67 percent in the previously month, mainly due to lawmakers widening the bracket of goods subject to value-added tax.
"As a policy response to higher inflation the central bank might jack (up) rates," said Joshua Anene, a trader at Commercial Bank of Africa, adding that the shilling could gain further in anticipation that interest rates will go up.
Typically, a jump inflation reading pushes up interest rate as investors bid higher for debt securities and the central bank could rise its key rate to try and contain consumer prices by increasing the cost of credit.
Higher interest rate locally makes it attractive for banks to hold shillings.
The shilling, which is 0.4 percent firmer so far this year, has rallied 1.8 percent since Sept. 20, shrugging off an attack by Islamist militants at a Nairobi mall that killed dozens of people.
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