NAIROBI Feb 8 (Reuters) – Kenya’s central bank said it mopped up a total 10 billion shillings ($120 million) of excess liquidity on Wednesday in two separate repurchase agreement operations.
The bank first accepted 2 billion shillings in seven-day repos at a weighted average rate of 14.461 percent after receiving 10.815 billion shillings in bids.
Thereafter, it mopped up another 8 billion shillings in five-day repos at a weighted average rate of 13.461 percent.
The central bank has been taking excess liquidity out of the market in a bid to support the shilling.
The currency slumped to a record low of 107 against the dollar in October, but has since rallied on the back of the repos, hard currency purchases by the central bank and high short-term interest rates.
Traders said there was a possibility the extra liquidity emanated partly from funds released by the government for projects planned in its 2011/12 budget.
“There could be government disbursement into ministries for various projects. That is the best bet for the liquidity,” Ignatius Chicha, head of markets at Citibank, said.
Before Wednesday’s action, the central bank was last in the repo market on Jan. 30, when it sought to mop up 1 billion shillings, but received no bids.
Chicha said the interbank weighted average had dropped significantly from 23.1 percent on Jan. 30 to 13.1 percent on Feb. 7, showing there was liquidity in the market.
(Reporting by George Obulutsa and Beatrice Gachenge; Editing by David Clarke)
