NAIROBI, June 2 – Kenya’s shilling may fall to a lifetime low against the dollar next week due to continued central bank buying of dollars and euros, while Ghana’s cedi may benefit from foreign interest in its high-yielding debt.
Kenya’s shilling is seen sliding further in the next week, and may even breach a lifetime low of 87.15 against the dollar if the central bank continues to build up reserves by buying hard currency.
Since May 10, it has regularly bought euros and mopped up shillings through repurchase agreements, in keeping with an intention to curb soaring inflation through tighter monetary policy.
At 1159 GMT, the shilling was trading at 86.70/90 against the dollar, weaker than last Thursday’s close of 85.60/70.
“87.15 is looking very tricky,” said Bethuel Karanja, head of trading at CFC Stanbic. “If it gets a catalyst in terms of continued purchases, then it will break through.”
Traders said an auction of 91- and 182-day Treasury bills on Thursday would give the shilling a sense of direction since it would indicate the levels of liquidity in the market.
“If the interest rates continue nudging upwards, the 91- and 182-day T-bills will need to correct in order to give impetus for investors to hold shillings,” said Ignatius Chicha, head of markets at Citibank.
The average yield on the 182-day Treasury bills stands at 5.4 percent, well below the yield on the 91-day Treasury bill, which stands at 7.942 percent.
Source: Reuters Africa newsletter
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