September 17, 2012 / 3:17 PM / 5 years ago

UPDATE 1-Kenyan shilling falls vs dollar, shares ease

* Shilling set to fall further on lower interest rates
    * Central bank repos, dollar sales eyed
    * Share trading volumes halve

 (Adds market close, stocks)
    By Kevin Mwanza
    NAIROBI, Sept 17 (Reuters) - Energy sector dollar demand
helped push the Kenyan shilling 0.4 percent down against
the dollar on Monday and the local currency was expected to
remain under pressure, while shares eased on lower trading
volumes. 
    "There is pent up demand (for dollars) as we approach end
month, mainly from the energy guys, " s aid Julius Kiriinya, a
trader at African Banking corporation, referring to demand for
dollars to pay for imports. "The shilling will remain under
pressure for now." 
    The shilling ended Monday's session at 84.65/85 per dollar,
from Friday's close of 84.30/50.
    "If the shilling crosses 85.00 the central bank may come in
with repos and even (a) direct sale of dollars to support it."
    The central bank has frequently intervened in the foreign
exchange market this year, regularly mopping up excess liquidity
via repurchase agreements (repos) and occasionally selling
dollars directly to commercial banks try to take shillings out
of the system. 
    On Monday, the bank absorbed 10 billion shillings ($119
million) having received bids worth 12.35 billion shillings for
the 10 billion shillings it had offered. 
    Traders said lower interest rates in the wake of a record
3.5 percentage point cut in the key central bank rate on Sept. 5
could also keep pressure on the local currency. 
     The cut put the benchmark rate at 13 percent
and economists expect further easing. 
    "With interest rates coming down we expect the shilling to
come down too. There is also excess liquidity in the market,"
said Solomon Alubala, head of trading at Co-operative Bank of
Kenya.
    On the stock market, the main NSE-20 Share Index 
fell slightly for the second straight session, down 0.1 percent
to 3,950.18 points. The volume traded, 170 million shillings,
was less than half Friday's volumes. 
    "The massive fall in volumes was mainly due to dividend book
closure on large caps like Safaricom," said Virginia
Wairimu, a research analyst at Suntra Investment Bank.
    Kenya Airways fell 3 percent to 12.95 shillings as
investors anticipated competition on local routes would hurt its
earnings. The company, one of Africa's leading airlines, plans
to cut hundreds of jobs to rein in high costs. 
    "Low-cost carrier FastJet, which this year bought out Fly
540, is set to start its operation in November and will
intensify competition in the aviation sector especially in local
routes," said Standard investment Bank in its daily report.
    In the debt market, 4.9 billion shillings worth of
government and corporate bonds were traded, up from 4.8 billion
shillings on Friday.
               ...........................Shilling spot rates 
                  .....................Shilling forward rates 
                           .......................Cross rates 
         ..................................Local contributors 
           .......................Central Bank of Kenya Index 
          .....................Kenyan Bonds contributor pages 
                          ...............Treasury bill yields 
        ..................Central bank open market operations 
        .........................Horizontal repo transactions 
         ,       ................Daily interbank lending rate 
              .............................Kenya Bond pricing 
             ..................Real time Africa economic data 
 <ECI & AFR> ...........................African economic news
          .................................NSE-20 Share Index
         .................................NSE All Share Index
             ...........................FT NSE Kenya 15 Index
             .......................... FT NSE Kenya 25 Index
  SPEED GUIDES:
                                    
            
 
 (Editing by Richard Lough and Jane Merriman)

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