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Offshore inflows into high-yielding government debt and banks selling dollars helped the Kenyan shilling firm on Monday, while stocks were dragged down by tea and coffee grower Sasini.

Traders said increased offshore investor appetite for government paper across east Africa fuelled by high yields had increased greenback inflows, supporting local currencies.

“The market also seems to have priced in the $600 million international loan the (Kenyan) government is seeking and it may remain bullish for sometime,” Duncan Kinuthia, head of trading at Commercial Bank of Africa.

The government is set to seal the loan this month for infrastructure projects.

At the 15:00 SA time close of markets, banks quoted the shilling at 83.45/55 against the dollar, stronger than Friday's close of 83.80/90.

Technical analysis of the 14-day and 50-day simple moving averages showed that the shilling is expected to keep on a strengthening trend in the short term.

Traders said they expected the shilling to trade in the 83.00-84.50 range this week.

The Central Bank of Kenya held its key lending rate at 18 percent for a second straight month in February, disregarding a marginal fall in inflation over the last two months to 18.31 percent in January.

“With the overall aggregate demand in the economy being depressed due to the current high cost of accessing credit, the shilling could strengthen further in the days to come as supply overwhelms demand for the greenback,” Bank of Africa said in a note to clients.

In the stock market, the benchmark NSE-20 Share Index fell 0.9 percent to 3,167.49 points, weighed down by Sasini, which plunged 15.9 percent to 10.30 shillings.

The share fell after it started to trade minus its dividend.

Traders said Monday's fall was exacerbated by a flood of sell orders in a thin market and they expected the price to correct in the coming sessions.

“While (Sasini's) share price should have traded 4 percent lower after going ex-div, the share price declined 15.9 percent to an oversold position,” said Standard Investment Bank in a daily market report.

In the debt market, traders said the central bank will offer a reopened 12-year infrastructure bond and a new one-year Treasury bond worth a total 20 billion shillings ($239 million) at auction this month. Both will be on sale until February 21.

“The one-year paper is easy to raise and cheaper for the government. Banks, which are the biggest buyers, also want shorter papers,” said Kinuthia. - Reuters