Shilling seen gaining on strong tea, debt inflows

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Traders said the shilling could get support from an expected holding steady of interest rates at the CBK monetary policy meeting on Monday. FILE 

By Kevin Mwanza (Reuters)

The Kenyan shilling held steady on Friday with traders expecting it to firm in coming sessions on dollar inflows from the tea sector and foreign funds moving into local debt and equity markets.

Traders said the shilling could also get support from an expected holding steady of interest rates at the central bank's monetary policy meeting on Monday.

At the 1300 GMT market close, commercial banks quoted the shilling at 83.60/80 per dollar, the same level it closed at on Thursday. It is 2.8 per cent stronger so far this year.

Out of 13 analysts and traders polled by Reuters 10 expected policymakers to keep the central bank rate at 9.50 per cent for the second straight meeting, held every two months, citing an upside risk to inflation due to higher food prices.

"The potential upside in headline inflation in Q3 may also make further easing too premature as lending rates are yet to adjust to the previous cut in January," said Alex Muiruri, a fixed income trader at African alliance Investment Bank.

In stocks, the benchmark NSE-20 share index rose 0.7 per cent to 4,821.17 points, led up by shares in retailer Uchumi, which jumped 6.5 per cent to 19.75 shillings each, halting a five-session slump that saw it fall nearly 15 per cent.

Safaricom, the country's biggest cell phone network provider and the bourse's most traded stock, climbed 0.7 per cent to 7.05 shillings a share ahead of full-year results.

Its shares have rallied nearly 40 per cent this year to a near five-year high as investors bet on a higher dividend payout for the year after its pretax profits doubled in the first half.

"Reduced capex leaves the cash rich business with strong reserves and expectations of higher dividends are pegged on this fact," said Ronald Lugalia at Afrika Investment Bank.

In the debt market, bonds worth 5.4 billion shillings were traded, down from 6.9 billion shillings on Thursday.