NAIROBI: Kenya’s shilling weakened modestly against the dollar on Thursday, with the local currency seen vulnerable to further losses due to loosening liquidity following a sharp fall in government debt yields. Stocks were up.
At the 1330 GMT close, commercial banks quoted the shilling at 102.15/25 to the dollar, slightly weaker on Wednesday close of 101.85/95.
“T-bill yields are the driver in the market,” said one Nairobi-based trader.
The shilling, down about 12.7 percent against the dollar this year, had firmed in recent weeks due to inflows of dollars from offshore investors chasing high-yielding government debt.
But in Wednesday’s auction the debt yields plummeted, even if they still remain at an elevated level.
The yield on the 182-day bill fell to 16.492 percent from 21.028 percent last week, while the yield on the 364-day bill dropped to 17.130 percent from 21.212 percent. Traders say rates have dropped due to a $ 750 million syndicated loan the government secured recently.
In a sign of increasing liquidity in the money markets, the weighted average interbank lending rate fell to 10.12 percent on Wednesday from about 15.1 percent two weeks ago.
The trader said the shilling could weaken to the 102.50-103.00 range.
On the equity market, the NSE 20 share index edged up 37.93 points to close at 3868.09, but still close to its lowest levels in three years.
Shares for Kenya’s top telecom provider Safaricom, the biggest stock on the bourse by market capitalisation, were up .65 shillings, trading at 14.95 shillings per share, after the company announced a sharp rise in new subscribers and raised its full-year income forecast.
In the debt market, bonds worth 940 million shillings ($ 9.21 million) were traded, compared with the previous session’s 1.28 billion shillings.