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Kenyan Shilling Steady Ahead Of Interest Rate Decision
A fuel attendant handles Kenyan shilling notes at a petrol station in the capital Nairobi March 15, 2011. PHOTO BY REUTERS/Noor Khamis.
By Richard Lough and Kevin Mwanza
02/09/2013
NAIROBI (Reuters) - Kenya's shilling was steady on Monday as investors traded cautiously ahead of a central bank interest rate-setting meeting on Tuesday, while shares fell.
The bank's Monetary Policy Committee (MPC) is expected to leave its benchmark lending rate on hold at 8.50 percent until the end of the year to counter rising inflation and weakening currencies, a Reuters poll showed.
At 1300 GMT market close, the shilling traded at 87.45/65 per dollar, unchanged from Friday's close.
Traders said there was talk in the market of a possible small rate increase after Kenya's inflation rate climbed to 6.67 percent in August from 6.02 percent a month earlier, though a hold was still widely expected.
"It is unlikely to affect the MPC more than marginally as upside risks to the inflation outlook emanating from food and energy prices still remain," said Mark Bohlund, economist at IHS Global Insight.
"There will be less pressure on the central bank to shore up confidence in the FX market through shifting to a more hawkish bias in its monetary policy."
In the event of a rate hold the shilling is seen weakening towards its 87.70 support level as importer demand for dollars increases.
"We have also seen profit taking on the stock market so we could see money moving out," said Andlip Nazir, a senior trader at I&M bank.
"And if the interest rate is on hold, interest yields will not be that attractive, so I think we could see some money going out from (maturing) Treasury bill and Treasury bonds."
In stocks, the benchmark NSE-20 share index fell 0.6 percent to 4,669.85 points.
The index has slipped since early last week pressured by profit-takers after a recent half-year earnings rally. It is still 14 percent up so far this year.
Nation Media Group, east Africa's largest media house, dropped 2.9 percent to 306 shillings. The group posted an 18 percent rise in half-year profit on Friday, which analysts said was below expectation.
Rival Standard Group, which also runs a daily newspaper, television and radio stations, doubled its pre-tax profit in the same period. Its shares rose 0.9 percent to 26.50 shillings.
In the secondary bonds market, debt worth 1.9 billion shillings was traded, down from 2 billion shillings on Friday.
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