Kenyan shilling hits a two-month high

The Kenyan shilling strengthened to a two-month high on Monday, boosted by dollar inflows into local stocks and bonds from investors abroad.

At the 1330 GMT close of trade, commercial banks posted the shilling at 102.10/20 per dollar, up from 102.40/50 at Friday’s close, its strongest level since Aug. 17.

The currency was receiving support from inflows ahead of an Oct. 21 auction of an amortised one-year Treasury bond, and more broadly from its weekly Treasury bills auctions, said a trader at a commercial bank.

“We have seen dollar inflows from foreign buyers coming in for the bond,” the trader said.

“And, later in the week, as long as the T-bills continue to be this high, the shilling will continue to gain.”

In recent weeks traders have reported growing dollar inflows from foreign investors attracted by rates on government Treasury bills of more than 20 percent, far above what Kenya usually pays for short-term debt.

The spike in rates has been caused by the central bank’s monetary tightening in June.

In the stock market, the benchmark NSE-20 share index rose 0.75 percent to close at 3,930.32 points, as investors sought bargains after recent weakening.

Like other frontier markets, the Nairobi bourse has been under pressure for most of this year, as investors sought safety ahead of a potential interest rate rise in the United States.

Shares, especially banks, fell to new lows last week after the central bank put a mid-sized lender, Imperial, into receivership, spooking investors.

In the debt market, bonds worth 809 million shillings were traded, down from bonds worth 2.26 billion shillings traded on Friday.