• Thursday, June 20, 2024
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Kenyans ditch dollars as local currency rallies most in 16 years after Eurobond sale

Kenyans ditch dollars as local currency rallies most in 16 years after Eurobond sale

Kenya’s shilling is the envy of many including Nigerians after it rallied the most in almost 16 years as locals offloaded dollars after the nation’s successful Eurobond sale fueled speculation a shortage of the US currency is over.

The shilling headed for its eighth day of gains — putting it on track for an almost 10% appreciation against the greenback in the period. That’s seen the currency go from second-worst performer in Africa to the strongest in the year so far.

A $1.5 billion Eurobond placement by Eastern Africa’s second-largest economy was met with strong foreign-investor demand this week, easing concern about the repayment of a note due in June.

On top of that, foreign investors are snapping up the local currency to pay for 241 billion shillings ($1.6 billion) of local infrastructure debt sold on Wednesday. The central bank accepted bids for about three times the amount of notes on offer.

“There has been an unwinding of domestic dollar long positions,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc. “Not all foreign investors participating in the infrastructure bond auction had converted dollars to shilling.”

The shilling surged as much as 4.7% against the dollar, the most since 2008, before trading 3.9% stronger at 146.61 per dollar by 12:32 p.m. in the capital, Nairobi.

Read also: Kenya’s new eurobond issue draws $5bn in orders says Bloomberg

Borrowings from the International Monetary Fund and the Trade & Development Bank have also boosted the volume of dollars in circulation.

“The question of dollar scarcity in the economy is no longer there,” said Rufas Kamau, market analyst at foreign-exchange trading platform FXPesa. “This is leading to a lot of panic selling by people who were holding dollars.”

In an interview on local television, Principal Secretary of the National Treasury Chris Kiptoo addressed currency investors directly.

“The risk of failure to settle the Eurobond is gone,” he said. “Sell your dollars and get back to business and don’t do any speculation anymore.”