NAIROBI: The Kenyan shilling rallied against the dollar for a fifth straight session on Tuesday, lifted by banks cutting dollar positions due to thin liquidity, while Centum Investments dragged the broad shares market lower.
At the 1300 GMT market close, commercial banks quoted the shilling at 84.15/35 against the dollar, up from Monday's close of 84.45/65.
John Muli, a trader at African Banking Corporation, said the shilling could firm further on the back of dollar inflows from offshore investors into a ten-year Treasury bond to be auctioned on June 20.
The central bank has not issued a 10-year bond in close to a year, after yields shot upwards on the back of high inflation, meaning this week's auction was likely to be met by healthy demand.
The shilling, which is up 0.8 percent against the dollar so far this year, has rallied a total of 1.5 percent in the last five sessions, thanks to aggressive tightening of liquidity by the central bank and a build-up of foreign exchange reserves.
During Tuesday's session, the central bank mopped up 1 billion shillings ($11.8 million) from the market in 28-day repurchase agreements (repos) at a weighted average interest rate of 18 percent.
The regulator had sought to absorb 1 billion shillings and it received bids worth 3.15 billion shillings.
Traders said festering uncertainties surrounding the euro zone crisis, and importers buying dollars to take advantage of the shilling's rally over the last week, could weigh on the shilling soon, cutting the rally.
In shares, the benchmark NSE 20-Share index shed 0.5 percent to close at 3,663.11 points, while traded volumes across the market rebounded 276 percent to 396 million shillings worth of shares traded.
The all share index dipped 0.35 points to 80.18 points, dragged down by shares in investment firm Centum , after its full year profit tumbled without prior warning.
Investors, caught flat-footed by lack of a profit warning, sold off Centum shares after it posted a 40 percent drop in its full year pretax profit, sending them down 9.8 percent to 13.30 shillings.
"Centum operates in a very cyclical business and is quite volatile. But we expect them to recover in the coming year," said Johnson Nderi, an analyst at Suntra Investment Bank.
In the debt market, government and corporate bonds worth 1.06 billion shillings were traded, slightly lower than the 1.08 billion exchanged on Monday. The 12-year infrastructure bond was the most active at a yield of 12.3 percent.
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