UPDATE 2-Kenyan shilling firms after banks sell dollars; shares fall

Mon Apr 7, 2014 12:16pm EDT

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NAIROBI, April 7 (Reuters) - The Kenyan shilling firmed slightly on Monday after commercial banks sold dollars and the central bank mopped up excess liquidity, while stocks eased for the second straight session.

The shilling closed at 86.60/70, compared with Friday's close of 86.65/75.

"There was some dollar demand from the energy sector, against little dollar inflows, but interbank players were selling dollars at these levels to book profit," said John Njenga, a dealer at Commercial Bank of Africa.

Traders said the shilling had also received support from the central bank mopping up excess liquidity from the market.

"It is the CBK (Central Bank of Kenya) that is stopping the shilling from further weakening," said Bank of Africa trader Robert Gatobu.

The central bank absorbed 10.9 billion shillings ($125.79 million) on Monday after seeking to mop up 13 billion shillings.

It has persistently mopped up liquidity since last year to support the shilling, and this has also helped the weighted average interbank rate to rise, making it more expensive for banks to hold long dollar positions.

Gatobu said the shilling was likely to have fallen through 87 without the central bank's interventions, which last week helped offset demand for dollars from energy firms, manufacturers and oil importers.

On the Nairobi Security Exchange's benchmark NSE-20 index , stocks closed down 0.8 percent at 4,869.75.

Silha Rasugu, research analyst at Genghis Capital said foreign investors had largely shunned the market after the main earnings season ended in March, leading to thin volumes.

"We have seen relatively low prices compared with the earnings season, we expect a lull in the short-term," he said.

Rasugu said stocks such as British American Tobacco Kenya had dragged the market lower after its shares started trading without a dividend.

Kenya Airways was among the gainers after the delivery of the Kenyan flag carrier's first 787 Dreamliner over the weekend, the first of nine 787 Dreamliners set to join its fleet. Its shares rose 0.8 percent to 13.15 shillings.

Traders said investors were also taking positions on its shares ahead of its results. It swung into a pretax profit of 548 million shillings ($6.39 million) in its first half ended September, from a loss of 6.589 billion shillings in the same period last year, and forecast strong full-year earnings.

"Kenya Airways closes its books at the end of March, and after returning to profit investors are taking a position ahead of its full-year results, eyeing higher dividends," said Rasugu.

On the secondary market, government bonds valued at 2.82 billion shillings were traded, down from 2.88 billion shillings on Friday.

KES= KES1=...........................Shilling spot rates

KESF= 0#KESF=.....................Shilling forward rates

EURKES= KESX= KESX1=.......................Cross rates

KES=KE..................................Local contributors

CBKINDEX.......................Central Bank of Kenya Index

KE/DEBT.....................Kenyan Bonds contributor pages

CBK03 CBK06 KE3MTB=...............Treasury bill yields

CBK04..................Central bank open market operations

CBK07.........................Horizontal repo transactions

KEIBR=, CBK02................Daily interbank lending rate

0#KETSYSTR=.............................Kenya Bond pricing

ECONAFRICA..................Real time Africa economic data

<ECI & AFR> ...........................African economic news

.NSE20 .................................NSE-20 Share Index

.NASI .................................NSE All Share Index

.FTFNKEN1 ...........................FT NSE Kenya 15 Index

.FTFNKEN2 .......................... FT NSE Kenya 25 Index

($1 = 86.6500 Kenyan Shillings) (Reporting by James Macharia; Editing by Pravin Char)

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