The Central Bank of Kenya (CBK) said it was offering Kshs.8 billion into money markets using reverse repurchase agreements.

Traders on Friday last week have said the repo offerings help ensure smaller banks have access to shilling liquidity, which the CBK has said tends to be skewed towards larger lenders in the Kenya market.

The sale of dollars helped shore up the shilling after yields on the 91– day Treasury bill fell below 10 per cent at auction, making the paper less attractive to offshore investors.
By 10.02 am on Friday, the shilling was quoted at 102.20/40, little changed on Thursday’s close of 102.25/35.
“The Central bank was in the market earlier today,” said one dealer, saying he thought the action was “mostly because of the steep drop” in the 91-day T-bill, whose yield tumbled from more than 20 per cent last month to 9.654 per cent at Thursday’s sale.
Another trader confirmed the Central bank move.  The Central Bank does not normally comment on interventions.
The surge in yields on T-bills of various tenors last month to above 20 per cent had attracted offshore dollar inflows, helping reverse some of the recent weaknesses in the currency.
Dealers said the slide in yields could now start putting more pressure back on the shilling, which in September had almost touched its 2011 all-time low of 106.80.
The currency has been under pressure from a range of factors such global dollar strength and Kenya’s widening trade gap.

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