The Kenyan shilling gained for the sixth straight session to hit a five-week high against the dollar on Wednesday, lifted by tightening liquidity, while stocks rose nearly 1 percent driven up by bargain hunters.
Market players said strong foreign investor appetite expected at Wednesday's 10-year Treasury bond auction was also supporting the shilling, but that usual end-month dollar demand could put pressure on the local currency in the days ahead.
At close of trade at 15:00 SA time, commercial banks quoted the shilling at 83.55/75 per dollar, a level it last touched in mid May, and 0.7 percent stronger than Tuesday's close of 84.15/35.
“The shilling is supported by (anticipated) dollar inflows into the 10-year bond on sale today and tightening liquidity in the market,” said a trader at one commercial bank.
“Dollar demand is also subdued at the moment, but end-month demand might weigh on the shilling in coming days.”
The Central Bank of Kenya plans to raise 5 billion shillings ($59.38 million) from the 10-year bond's sale.
The bank has not issued a 10-year bond for almost a year, after yields shot upwards on the back of high inflation last year. Fixed income traders said this week's auction was likely to be met by healthy demand.
The shilling has rallied 2 percent in the last six sessions, mainly on aggressive tightening of liquidity by the central bank using longer tenure repurchase agreements (repos) and a build-up of foreign exchange reserves.
During Wednesday's session the central bank said there was no excess liquidity in the market and stayed out.
On the Nairobi Securities Exchange, the main NSE-20 Share Index rose 0.9 percent to 3,694.55 points driven higher by bargain hunters buying across a number of firms.
Oil supplier KenolKobil rose 4.4 percent to 13.05 shillings on resumption of trade following a May 8 suspension from the bourse due to news that it was a takeover target by Swiss-based Puma Energy, a subsidiary of Trafigura Beheer.
KenolKobil said on late on Tuesday it expects its half-year 2012 profit to be hurt by foreign exchange losses, falling international oil prices and high financing costs.
“We expect an offer to minority shareholders from Puma Energy to be at a substantial premium to the current share price, subject to an ongoing due diligence,” said Standard investment Bank in a daily note to its clients.
In the debt market, government and corporate bonds worth 432 million shillings were traded, down from 1.06 billion on Tuesday. - Reuters