UPDATE 1-Central bank action lifts Kenyan shilling; shares down

Thu Mar 27, 2014 10:39am EDT

Related Topics

* Central bank mops up 6.35 billion shillings
    * Kenya Airways falls after tax concessions plea

 (Adds shares, closing rate)
    By Duncan Miriri
    NAIROBI, March 27 (Reuters) - The Kenyan shilling 
strengthened against the dollar on Thursday after the central
bank moved to take excess liquidity out of the market. Shares
drifted lower. 
    At the 1300 GMT close of the market, leading commercial
banks posted the shilling at 86.40/50 per dollar, up from
Wednesday's close of 86.60/70. 
    The central bank took 6.35 billion shillings out of the
market through a repurchase agreement (repo) at a weighted
average interest rate of 8.248 percent. It had sought to mop up
10 billion shillings but only got bids for 6.35 billion
shillings ($73.09 million). 
    "Central bank came in with a repo which drained excess
liquidity from the market, thereby making the shilling
strengthen," said Sheikh Mehran, a trader at KCB Bank.
    The central bank's action followed a drop in the overnight
borrowing rate on the interbank market to 8.1425 percent on
Wednesday from 8.4044 percent the previous day.
    Lower short-term interest rates usually make it slightly
cheaper for banks to fund long dollar positions, exposing the
shilling to downward pressure.
    On the stock market, the benchmark NSE-20 share index
, edged down 0.2 percent to close at 4,958.62 points.
    "Generally, the market looked weak," said Eric Musau, a
research analyst at Standard Investment Bank.
    Shares in national carrier Kenya Airways dropped 3
percent to close at 12.20 shillings each, after reports in local
newspapers that it wanted exemptions from sales tax on purchases
of spare parts for its aircraft, which have been driving up its
costs.
    "They are trying to get tax concessions, but that
communication reaching the market is being viewed negatively,"
Musau said.
    National Bank was the biggest loser, shedding 8
percent to close at 28.50 shillings a share, as the market
continued to react to its full-year earnings report, issued the
previous day.
    National plans to raise 10 billion to 13 billion shillings
in a cash call to fund expansion.   
    "That (cash call) remains the key issue. It is going to be
under pressure until that transaction is completed," said Musau.
    In the debt market, bonds worth 2.17 billion shillings were
traded, up from the previous day's 1.2 billion shillings.   
               ...........................Shilling spot rates 
                  .....................Shilling forward rates 
                           .......................Cross rates 
         ..................................Local contributors 
           .......................Central Bank of Kenya Index 
          .....................Kenyan Bonds contributor pages 
                          ...............Treasury bill yields 
        ..................Central bank open market operations 
        .........................Horizontal repo transactions 
         ,       ................Daily interbank lending rate 
              .............................Kenya Bond pricing 
             ..................Real time Africa economic data 
 <ECI & AFR> ...........................African economic news
          .................................NSE-20 Share Index
         .................................NSE All Share Index
             ...........................FT NSE Kenya 15 Index
             .......................... FT NSE Kenya 25 Index
  SPEED GUIDES:
                                    
            
  ($1 = 86.8800 Kenyan Shillings)

 (Editing by James Macharia, Larry King)
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