Nairobi, May 17th- Kenya’s shilling slumped for the seventh straight day, its longest losing streak in nine months, as falling yields on government securitiesdamps investors’ appetite.
At 0712 GMT, commercial banks posted the shilling at 84.25/45, down from the previous day’s close of 84.20/40.
Yields at the short end of the Kenyan government bond curve have fallen by about 200 basis points at recent debt auctions due to a build-up of liquidity that could enable traders to take short shilling positions. “The falling yields on government securities have undermined the shilling on reduced inflows form investors who were targeting the higher yields hence propping the shilling,” Raphael Agung, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said on phone
Together with the global flight to the dollar due to fears of a Greek exit from the euro currency, traders said that could drive the shilling lower in the days ahead, if the central bank does not intervene adequately to prop it up.
But the central bank has the tools to forestall a weakening in the currency, Owino said, citing its injections of dollars into the market and its ability to control the fall in yields on government securities to ensure they remain attractive. “They learnt their lessons well last year,” he said, referring to a prolonged weakening of the shilling that angered politicians and citizens and forced the central bank to tighten liquidity aggressively to stabilise the currency.
Forex analysts, however, said that with CBK support, the shilling would stabilise at Sh83 in the coming days.