Paramount Bank :: Market Analysis

FOREIGN EXCHANGE - MARKET ANALYSIS

Kenya

Kenyan shares rose for a third straight day as investors scooped up banking and insurance shares, while the shilling slid after the central bank bought dollars. Kenya is Africa's best-performing stock market this year, helped by optimism on a new constitution, which drew a resounding "Yes" vote this month.

The main stock index, NSE-20, closed 0.66 percent or 30.22 points higherat 4604.77 points and top gainers included NIC Bank ahead of its first-half results, which are expected this week.

Traders said the bond market was expected to trade flat, after government bonds worth 504 million shillings changed hands on Tuesday, down from 620 million on Monday. The traded yield on the 20-year bond stood at 8.65 percent. The market is watching the performance of a nine-year amortised government infrastructure bond worth 31.6 billion shillings that went on sale earlier in the month. On Tuesday, the chief executive officer of the Nairobi Stock Exchange forecast that the bond would be oversubscribed because its coupon was not taxed.

Traders said they were also watching how Thursday's 182-day Treasury bill was received. The yield on the bill stood at 1.999 percent at the latest sale two weeks ago. Kenya's shilling eased against the dollar on Wednesday, due to dollar demand from the energy and telecoms sector, while bond trade was flat.

At 0819 GMT, commercial banks quoted the shilling at 80.75/85 to the dollar, compared with 80.45/55 at Tuesday's close. Traders said there was also dollar buying from energy companies and from commercial banks.

The World

The dollar edged up against the yen on Thursday with investors reluctant to chase the yen higher as they waited to see if the Bank of Japan or the government will take new steps to rein in the yen's rise.

The euro surrendered early gains and fell against the dollar on Wednesday in technical trading after again failing to holds above a key psychological level.

Earlier, the euro had rallied for the third straight day against the dollar after a German government bond auction attracted solid demand, easing some concerns about fiscal instability in the European Union. That euphoria failed to last much into the New York session.

The dollar came under fresh selling pressure against the yen, easing toward recent 15-year lows on growing speculation that Japanese authorities are unlikely to intervene to counter their currency's recent strong run.

Sterling rose after the the release of minutes from the Bank of England's latest policy meeting showed officials were less dovish than expected.

The Swiss franc moved towards the near 6-week peak hit against the euro earlier this week and was expected to test the next key level of 1.33 per euro, as markets remained cautious about taking on risk. The Swiss franc has been gaining against the euro in recent days on a renewed bout of jitters that emerged in financial markets after the U.S. Federal Reserve announced fresh bond-buying plans to shore up flagging growth.

The Australian dollar drifted lower on Thursday, as some used uncertainty over the country's election as an excuse to sell into recent gains amid cautious support for risky trades as equities struggled. The New Zealand dollar benefited from the weaker neighbouring currency.