High rates boost Kenyan shilling

Kenya’s shilling firmed on Friday on dollar inflows from offshore investors interested in buying high-yielding government debt as the benchmark share index edged lower.

At the close of trade, commercial banks quoted the shilling at 105.25/35 to the dollar, compared with Thursday’s close of 105.55/65.

“It has been driven by interest rates. The demand is coming from foreign investors attracted by the good rate,” said one trader at a commercial bank in Nairobi.

On Thursday, the weighted average yield on 91-day Treasury bills jumped to 18.607 percent from 14.486 percent at last week’s sale, the central bank said.

The yield on a one-year bond also on sale rose to 19.062 percent from 16.432 percent at the last sale in 2012.

In the stock market, the benchmark NSE-20 share index lost 1.45 points to close at 4,221.10.

Like other frontier stock markets, Kenya has been under pressure this year due to investor flight into less risky assets, ahead of an expected rise in U.S. interest rates.

In the debt market, bonds worth 74 million shillings were traded, down from Thursday’s 220 million shillings.