Kenya shilling opens stronger after poll results

A man counts bank notes. The Kenya shilling reacted well to the peaceful conclusion to the election tallying opening strongly against the dollar in Monday's trading. Photo/File 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

Posted  Monday, March 11  2013 at  13:24

The Kenya shilling reacted well to the peaceful conclusion to the election tallying opening strongly against the dollar in Monday's trading.

The local currency opened at 85.40 units to the dollar according to dealers at Commercial bank of Africa, which was a shilling higher that the closing rate of 86.25/45 on Friday. At ABC bank, the local unit opened the week’s trading at a rate of 86.20/80.

Dealers at CBA said that the reaction of the shilling to the political outcome was a positive one, as shown by the significant gain made in the morning trade.

They said that the shilling has so far taken the political events in its stride, keeping a positive run against the dollar in a bullish run that saw the unit hit a three month high against the US currency last week.

(Read: Shilling rises to three-month high on peaceful polls)

The shilling however retreated slightly dropping back to trade at 86.55/65 at CBA later in the morning.

A Senior Dealer at CBA, Mr Joshua Anene, said that the two main risk factors facing the shilling this week will be the CBK Monetary Policy Committee meeting to be held Tuesday and the legal contest over the results of the presidential election.

(Read: CBK expected to hold policy rate with eye on election)

“The Policy Council meeting on Tuesday is the key market risk this week. To add to that, we expect the political risk to the shilling to remain elevated until the dispute over the election is resolved,” said Mr Anene.

The Central Bank has also helped the shilling remain strong through mopping up of excess liquidity from the market in recent weeks that has helped tighten the money market.

The Central Bank’s open market repo transactions resulted in a net liquidity withdrawal of Sh6.8 billion last week, although the average interbank rate decreased to 9.72 per cent during the week ending March 8, 2013 from 10.09 per cent recorded in the previous week.