NAIROBI: The Kenyan shilling firmed slightly against the dollar on Tuesday after the government received $240 million from international lenders, and traders said it could gain further after the central bank held interest rates for a sixth month.
The shilling finished the day at 85.80/86.00 per dollar, slightly up from Monday's close of 85.90/86.10. The central bank's rate decision was announced after markets had closed.
Policymakers left the benchmark interest rate unchanged at 18 percent for a sixth month in a row, saying potential risks to inflation and the stability of the shilling remained.
"It was expected in the market that they would hold the rate because they are still worried about the shilling which could come under attack from external pressure like the euro zone crisis," said Ignatius Chicha, head of markets at Citi Kenya.
The decision to hold the policy rate, which was accompanied by a pledged to step up open market operations to mop up persistently high liquidity, could draw hard currencies from overseas investors into government debt and curb consumer demand.
Chicha said sentiments were in favour of a firmer shilling after the Treasury said it had received $240 million in a first batch payment for a $600 million international syndicated loan.
The shilling has lost 1.1 percent in the year to date, weighed on by the global flight to the safety of the dollar due to concerns about a possible Greek exit from the euro and falling yields on government debt at home.
Analysts said this year's fall by the shilling would have been worse if the central bank had not been actively intervening in the market to prop up the currency through regular repurchase agreements (repo) to absorb liquidity and the sale of dollars.
During Tuesday's trading session, it sought to mop up 8 billion shillings ($93.1 million), received bids worth 5.8 billion and accepted them all at a weighted average interest rate of 17.8 percent.
In the stock market, the benchmark NSE-20 share index fell 0.48 percent to close at 3,635.86 points, weighed on by falls across most blue chips.
Equity Bank shed more than 2 percent to close at 20.25 shillings while Nation Media also lost more than 2 percent to close at 160 shillings per share on a thin volume.
On the list of gainers for the day, Internet provider AccessKenya led the charge, adding 8.57 to finish at 5.75 shillings, thanks to investor demand ahead of closure of books for 1 for 20 bonus share issue mid this month.
In the bond market, securities worth 846 million shillings were traded, down from the 1.67 billion shillings worth of bonds traded in the previous session, as market participants awaited the rate decision.
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