The local unit slightly advanced against US dollar as demand for dollars remained subdued in the local market. The shilling has been supported by inflows of dollars from foreigners looking to tap into government debt issues. The shilling could come under pressure as mid month demand for dollars kicks in and dollar inflows subsides. The below USDKES graph indicates that the currency pair is in buy territory since the average rate is below the linear rate.
US dollar remained largely unchanged against most of its major peers on Friday despite release of upbeat employment data. US added 235k jobs in February versus market expectations of 190k while unemployment rate edged down from 4.80% to 4.70% as per market expectations. The positive employment data cemented market expectations of a rate hike during FED interest rate decision on Wednesday this week.
Euro advanced against US dollar after European Central Bank (ECB) left its benchmark interest rate unchanged. ECB chair Mario Draghi reiterated that deflation fears had abated and further policy adjustments was unnecessary.
Bank of England (BOE) interest rate decision and Federal Reserve (FED) interest rate decision headline economic releases this week among other releases. ECB Draghi’s speech, US retail sales and CPI data would also rattle the markets.
Key benchmark interest rates
Interbank lending rate decreased by -0.435% from 4.7292% to 4.2935%. Volume traded averaged 11.608 billion during the week. There was minimal activity in the interbank market during the week.
91 day T-bill rate rose by 0.058% from 8.628% previous week to 8.686%. CBK offered a total of Kshs 4 billion. Bids amounted to Kshs 9.695 billion of which Kshs 8.606 billion were accepted.
The regulator did not offer investors an opportunity to invest in the 182 day Treasury bill during the week. The move was to increase bids on the 364 days Treasury bill as interest rates between the 182 and 364 days t-bills converged as indicated by the graph below.
364 day T-bill rate rose by 0.006% from 10.895% previous week to 10.901%. CBK offered a total of Kshs 6 billion but accepted Kshs 16.12 billion.
Volume on t-bill bids increased in all auction participations during the week. T-bill rates may hold steady or slightly decline in the coming week.
CBK was in the market to mop up 12 billion shillings during the week via term auction deposits. There were bids amounting to 47.65 billion shillings of which only 12 billion was accepted at an average rate of 8.51%. The 47.65 billion bids indicate that there is excess liquidity in the interbank market.
The graphs below depicts visual movement of the interbank rates.
The graphs below depicts visual movement of the T-bill rates.
Total Kenya (TOTL) continued its run as the best performer for the second week in a row. The stock price appreciated by 5.88% to close at 18.00 shillings per share.
Kenya Commercial Bank (KCB) share remained among the top performers during the week. The stock appreciated by 3.51% to close at 29.50 shillings per share on Friday.