Kenya shilling firms on tea inflows, stocks rise

NAIROBI: The Kenyan shilling rose against the dollar on Wednesday helped by tea sector inflows and on banks selling doll
25 Jan, 2012

The Central Bank of Kenya, which has absorbed a total of 25.6 billion shillings ($298.2 million) through repos and sold hard currencies to commercial banks this month, to stem the shilling's fall, said it was out of the market during the session.

At the 1300 GMT market close, commercial banks quoted the shilling at 85.50/70 against the dollar, stronger than Tuesday's close of 85.80/86.00.

"We've seen some flows from the tea sector and tight liquidity in the market has pushed guys to sell dollars. Overnight rates have gone higher as a result," said Solomon Alubala, head of trading at Co-operative Bank.

Dollar earnings from tea, the top foreign currency earner for the east African nation, soared to 109 billion shillings ($1.27 billion) in 2011, thanks to high prices and a weaker local currency against the dollar.

In the money market, the weighted average interbank lending rate rose to 20.3 percent on Tuesday, from 19.2 percent on Monday.

Traders said they expected the shilling to trade in the 85.00-86.50 range in coming days, but dollar demand from corporates to meet end-month needs could weigh.

They said the market was still watching for any sign of public or political reaction after the International Criminal Court confirmed cases on crimes against humanity during post-election violence in 2007/08.

"The market is keen on reactions to the ICC ruling on Monday for any negative events that could affect the shilling," said a trader with one commercial bank.

At the Nairobi Securities Exchange, the benchmark NSE-20 Share Index edged up for a second straight day, adding 0.3 percent to 3,191.72 points.

"There is some optimism from foreign investors that the uncertainty we saw before the ICC ruling is gone," said Renaldo D'souza, an analyst at Genghis Capital.

"Guys are also buying shares ahead of full-year results next month. Prices of most stock have fallen and their dividend yields are quite high."

Equity Bank, which was among the stocks that attracted foreign interest, jumped 3.1 percent to 16.50 shillings a share.

Copyright Reuters, 2012

Read Comments