Kenyan Shilling Lost 0.5% And 0.4% Against The Japanese Yen And Tanzanian Shilling

During the week, liquidity in the money markets experienced improvement after two consecutive weeks of tightening.

The average interbank rate decreased to 13.39%, down from 13.67% in the previous week, primarily influenced by government payments that offset tax remittances. However, market activity declined, with average traded volumes slightly decreasing to KES 15.54bn from KES 15.88bn in the previous week.

In the Open Market Operations, the Central Bank offered KES 120.0 billion in reverse repos spanning 6, 7, and 14 days. Bids amounting to KES 126.53 billion were received, and KES 120.28 billion were accepted at an average rate of 13.69%, with most of the issues experiencing oversubscription.

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Trading activity in the domestic secondary market sustained its momentum, registering an increase of 20.9%, to KES 23.27bn compared to the preceding week’s total of KES 19.24bn.

In the primary bond market, the government aims to raise KES 70.0bn through a new infrastructure bond issue, IFB1/2024/8.5. Examining all bond issuances since June 2023 reveals an ongoing trend of escalating weighted average rates for accepted bids, regardless of the tenor or type of bond,

We expect the issuance to attract significant interest, although we envision the government limiting its borrowing to no more than 19.0%.

On the forex front, the shilling exhibited appreciation against most relevant currencies gaining 0.5%, 0.4%, and 0.2% against the Pound, Euro, and Ugandan Shilling, respectively. Conversely, the currency maintained relative stability against the dollar, closing at KES 160.57.

The shilling lost 0.5% and 0.4% against the Japanese Yen and Tanzanian Shilling, respectively.

We observe that the indicative rate is determined by calculating the weighted average rate of recorded spot trades in the interbank market. Generally, substantial currency exchanges tend to secure more favorable rates at commercial banks, a factor that is likely to soften the Central Bank of Kenya’s indicative rate.

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