April 6, 2011 12:16 PM EDT
The Kenyan shilling slid 0.78 percent against the dollar on Wednesday as banks took out long dollar positions after the central bank pumped in liquidity, while stocks edged up, led by banks and manufacturers.
At the 1300 GMT close of trade, leading commercial banks posted the shilling at 84.50/60 against the dollar, weaker than Tuesday's closing rate of 83.85/95. The close was lowest seen in nine straight sessions.
Central Bank of Kenya offered a reverse repo for 2 billion shillings during the session and accepted bids worth 5.63 billion shillings at a weighted average rate of 2.976 percent.
"It (reverse repo) looked like a bit of policy inconsistency... it muddles the picture a bit," said Dickson Magecha, a trader at Standard Chartered Bank.
The move followed two weeks of tightening shilling liquidity following a 25 basis points rate hike by the central bank on March 22 and its subsequent entry into the market with repurchase agreements, aimed at soaking up liquidity.
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"It (shilling) has been hammered. Before reverse repo we were below 84.00, after the repo, it was one way traffic," said Chris Muiga, a senior trader at Kenya Commercial Bank.
In stocks, the benchmark NSE-20 Share Index edged up 0.3 percent to close at 4,010.22 and extend gains to four straight sessions, driven by foreign investors who bought into blue chip firms.
"Foreign investors could be taking advantage of the current low prices. They are the ones driving most major counters," said an analyst at Sterling Investment Bank.
The gains were led by Co-operative Bank, which added more than 3 percent, and brewer East African Breweries whose shares leapt by 2.65 percent to 194.00
shillings, a ten-week high last touched on January 27.
EABL has rallied 20 percent since it touched a 52 week closing low on March 10, having tumbled more than a quarter since the beginning of the year.
"The push me, pull me price action has been driven by a general excitement and interest around African beverage companies and the implied compounded annual growth rates going forward," said Aly Khan Satchu, an independent analyst.
In the fixed-income market, bonds worth 1.44 billion shillings were traded, down from 1.607 billion on Tuesday.
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