The Kenyan shilling weakened on Wednesday, as the central bank pledged to contain inflation through money-market operations and to suspend voice brokers from the currency market.
The shilling has dropped 5.26 percent to the dollar this year as imports rose, tourism slumped and demand for dollars grew among importers and companies paying annual dividends to shareholders abroad. At the 1300 GMT close of trade, commercial banks posted the shilling at 95.10/20 to the dollar, its lowest point since November 2011, and slightly down from Tuesday’s close of 95.05/15.
Duncan Kinuthia, head of trading at Commercial Bank of Africa, said further weakening could be expected if the shilling convincingly passes the technical support level of 95.00. “I don’t see a favourable outlook,” he said. The central bank, which sold dollars to banks on three occasions last month to stamp out volatility, said it would pursue a tightening bias to contain inflation through moneymarket operations. Earlier, it asked commercial banks to stop dealing with voice brokers in the foreign exchange market, traders said.
They said the move to lock out the brokers would make discovery of price hard and enhance volatility. Aly Khan Satchu, an independent trader and analyst, said the central bank’s tougher language and its decision to lock out voice brokers were aimed at tamping down speculation, to ensure the shilling, which hitherto had been very stable, does not depreciate too rapidly.
In the stock market, the benchmark NSE-20 share index shed a third of a percentage point to close at 5,083.94 points. Shares of Kenya’s top bank by assets, KCB fell 2.0 percent to close at 60.5 shillings eachweighed on by some investors who booked their gains after the bank issued its trading results for the first quarter.
The bank’s pretax profit rose by 12 percent during the period, but Satchu said some investors may have been expecting faster growth. In the debt market, bonds worth 208 million shillings were traded, down from Tuesday’s volume of 515 million shillings.