Shilling gains more ground

Jul 20, 2011

The shilling has continued to strengthen against the dollar on the back of increased dollar inflows from exports and companies converting the greenback to shillings to pay taxes and buy Treasury Bills.

By Samuel Sanya

The shilling has continued to strengthen against the dollar on the back of increased dollar inflows from exports and companies converting the greenback to shillings to pay taxes and buy Treasury Bills.

The shilling was trading at an average of sh2,552/2,2574 against the dollar in inter-bank trading yesterday morning.

It was trading at sh2,560/2,570 over the weekend, from a low of sh2,610/2,620 a week before.

“The shilling gained against the dollar over the week mainly due to subdued corporate demand, plus sizeable inflows from exporters,” Dennis Mashanyu, a trader with Standard Chartered Bank, said in a report.

He pointed out that companies had continued to convert their dollars into shillings to take advantage of the Treasury Bill issues by the Central Bank as yields continue to edge-up on the Government monetary instruments.

Yields on the 91-day, 182-day and 365-day bills inched upwards in the previous week’s auction at an average of 80 basis points.

Mashanyu predicted that the shilling was likely to strengthen to sh2530/90 against the dollar, with additional Treasury Bill auctions expected this week.

“Next week (this week) the market expects the demand for shillings to stay high as the Central Bank auctions a 2-year paper worth $33m (sh85b). We expect some offshore interest in the 2-year auction to strengthen the shilling to 2530/2590, with a break on either side not likely to be sustained,” he predicted.

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