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Shilling to appreciate with low dollar demand

By Samuel Sanya

Added 14th November 2017 07:46 AM

There was a slight drop in both overnight and 1 week funds. Rates were 6% and 9.5% respectively.

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There was a slight drop in both overnight and 1 week funds. Rates were 6% and 9.5% respectively.

BUSINESS | RATES

The shilling strengthened and registered substantial gains in what was seen as market correction after overshooting through key support levels due to sentiment related to political uncertainty in the region, a report by Alpha Capital Partners Stephen Kaboyo says.

 
He notes that the average trading level last week was in the range of 3610/3620 buying and selling respectively. Daniel Sage Muganza, a trader at Centenary Bank noted that the shilling is benefiting from low dollar demand from corporates as they settle Value Added Tax (VAT) dues.
 
Kaboyo noted that in the money markets, there was a slight drop in both overnight and 1 week funds. Rates were 6% and 9.5% respectively.
 
In the fixed income space, treasury bill yields continued on the downward path. 91 days traded at 8.579%, 182 day at 8.777% and 364 at 9.298%. All tenors were oversubscribed.
 
In the regional markets, the Kenya shilling held firm. Demand remained subdued amid tight liquidity conditions in the money markets.
 
In the international markets, the greenback dipped and Wall street followed in a similar trend on expectations of possible delays in the long awaited US tax reforms. Markets took a view that delays in implementing corporate tax reforms could change the way the Federal Reserve reads the US economy and it's behavior with respect to the conduct of monetary policy going forward.
 
“The shilling is expected to strengthen marginally supported by commodity inflows that are expected to restore the balance between supply and market demand. The unit will also gain support on account of  mid-month tax payments that will keep corporate demand at bay,” Kaboyo explained.

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