Kenya’s shilling, the world’s best-performing currency against the dollar this month, advanced and headed for a fifth week of gains as businesses sought the local currency to pay for end-of-month bills.
The currency of East Africa’s biggest economy appreciated as much as 0.3 percent to 90.10 per dollar before trading less than 0.1 percent higher at 90.33 in Nairobi, taking its increase this week to 1 percent, according to data compiled by Bloomberg. The currency has added 9.8 percent this month, making it the best performer among more than 170 currencies tracked by Bloomberg.
Kenya’s monetary policy committee increased the key lending rate by 5.5 percentage points to a record 16.5 percent on Nov. 1 as it battles to contain inflation spurred by the worst regional drought in 60 years and higher fuel prices. Inflation accelerated to 18.9 percent in October from 17.3 percent in the previous month.
There is “low dollar demand as businesses seek the local unit to settle their monthly obligations,” Raphael Agung, a trader at Nairobi-based Commercial Bank of Africa Ltd., said by phone today.
The central bank will maintain its “tight” monetary policy stance until inflationary pressures ease, Ndung’u said in a statement handed to lawmakers today in Nairobi and obtained by Bloomberg.
“The government measures to stabilize the exchange rateare already yielding expected results,” Ndung’u said. “The exchange rate has strengthened considerably and volatility has been solved.”
Tanzanian, Ugandan Currencies
The Tanzanian shilling strengthened for the second day, gaining 0.4 percent to close at 1,697.50 per dollar.
“There are dollar inflows coming in from companies buying shillings to make end-of-month payments like salaries and taxes,” Hakim Sheik, a dealer at Commercial Bank of Africa Tanzania, said by phone today from Dar es Salaam, the commercial capital.
The Uganda’s currency weakened for a fourth day, retreating less than 0.1 percent to 2,597.50 against the dollar.
“The shilling fell on account of dollar demand by oil importers,” Daniel Sage, a currency trader at Centenary Bank Ltd. said by phone from Kampala. “Oil importers found the shilling attractive at the current rate on speculation that it may weaken further due to outstanding dollar demand.”
To contact the reporter on this story: Johnstone Ole Turana in Nairobi at jturana@bloomberg.net
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