Kenya’s shilling is heading for its best week in almost three decades after strong demand for a Eurobond sale boosted confidence in Eastern Africa’s second-largest economy.
This contrasts sharply with the case of the Naira and leading some in Nigeria to suggest a change in tack including exploring an IMF suppor to help Nigeria’s floundering national currency.
The shilling, which was Africa’s second-worst performing currency as recently as last month, has strengthened 8.8% so far this week, putting it on track for its biggest rally since October 1994.
A $1.5 billion Eurobond placement was met with strong foreign-investor demand, easing concern about the repayment of a note due in June. Foreign investors have also been buying 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.
“Investor concerns have eased after the government re-accessed international markets,” Faith Atiti, Diamond Trust Bank’s head of research and analysis, said in a note. “Easing uncertainty should support, albeit gradually, increased investments and consumption — lifting industry and services sectors.”
Most Kenyan banks placed bids in the infrastructure bond sale and local lenders now hold about half of the nation’s outstanding public debt stock, John Gachora, the chairman of the Kenya Bankers Association, said in a statement.
