Kenyan shilling seen firm despite elections

Tue 4 Dec 2007

By Helen Nyambura-Mwaura

NAIROBI (Reuters) - Kenya's currency will keep its strong tone against the dollar as market players do not see any political risk before this month's presidential election, bank treasurers said this week.

In the past, elections meant a weaker shilling but forex traders say that this time around, they are comfortable that whoever wins would be market-friendly.

Incumbent President Mwai Kibaki's government has revamped the economy and analysts say his main rival that has been leading recent polls, Raila Odinga, will not make any significant change to economic policy.

"We are not seeing a political equation built into the situation right now," said Zul Butt, treasurer at Citibank.

"It's the opposite right now, despite elections...you are seeing the currency at nine-year highs."

The shilling has been trading around a nine-year high for the last couple of weeks boosted by announcements of capital flows for investment in the telecoms and banking sectors.

On November 27 it hit levels last seen in December 1998.

Butt declined to give his estimates on the unit's trading levels after the December 27 election but said it would stay firm.

Other treasurers agreed that the local unit would remain stable, if not make more headway against the greenback.

"The politicking going on is not affecting the shilling at all," said Caroline Mugadi, treasurer at the Cooperative Bank.

"It is being affected by dealers' focus on funds coming in for capitalisation of the financial sector and other companies and also from other sources in form of investments," she added.

Mugadi saw the unit trading between 62.00-68.00 in the first quarter of 2008 but said it was bound to strengthen below the 60 level during an initial public offer of the country's largest mobile phone company, Safaricom, scheduled for this month.

The government hopes to sell off a 25 percent stake for about $600 million by the year's end, and demand for the shilling is expected to be extremely high.

In November, Kenya also announced that a consortium led by France Telecom made the winning bid for a 51 percent stake in state-owned Telkom Kenya worth $390 million. The deal will be concluded this month.

SWINGS

Exporters have complained the shilling's strength has hurt their earnings but the central bank governor has said it has firmed on fundamentals and a weakening of the dollar globally.

"The biggest issue facing the economy is inflation," Butt said. "Our view is that central bank focus would remain on inflation fighting."

Rising annual inflation, which hit 11.8 percent in November from October's 10.6 percent, has made production pricey.

Another treasury official said that in the short term, he expected wide swings in trading levels based on flows.

"In the short end, we are likely to see huge swings, up and down until the market settles at some point and is driven by fundamentals," said Chris Rwengo, head of trading at Standard Chartered Bank.

"It will have knee jerk reactions then reconsolidate itself. Whether it weakens or not, it will consolidate itself and start to follow fundamentals," he added.

Source : http://africa.reuters.com/business/news/usnBAN439799.html

Currency Market Update

Forex - Euro Surges To Weekly High Versus Sterling [EUR/GBP]

12/4/2007 1:20:01 PM The euro jumped to a weekly high against the sterling on Tuesday, rising to .7174 by noon ET. With the advance, the euro accelerated way from Monday's multi-week low of .7088 and back towards November's 4-year high of .7216.


Forex - Yen Rises Against Major Currencies Amidst Credit Market Worries [USD/JPY]

12/4/2007 11:47:53 AM With trader concerns over global credit markets, the yen made gains on the major currencies in Tuesday morning New York trading.

The yen rose against the dollar in early morning trading before leveling off around 7:00 a.m. Eastern Time. The yen hit a multi-day high of 109.54 at 9:30 a.m. working its way back to November's multi-year high.

The yen climbed versus the euro Tuesday morning before retreating back into a range between 161.55 and 162.09. The yen had spiked up to 160.91 at 5:00 a.m. Eastern Time before paring back its gains.

The yen jumped versus the pound after Monday's uncertain trading. The yen sprang up to 226.10 at 5 a.m. E.T. after hitting a daily low of 227.93. The yen has leveled off around 226.00 near a multi-day high.

Japan's monetary base rose 1% year-on-year in November to 87.16 trillion yen, a report from the Bank of Japan showed Tuesday. A year ago, the monetary base fell 22.3%. The seasonally adjusted monetary base grew 0.5% year-on-year in November, smaller than the 2.4% registered in October.


Forex - Loonie Pares Some Of Its Early Losses As Traders Continue To Assess BOC Rate Cut [USD/CAD]

12/4/2007 11:22:56 AM The loonie pared its early losses against the dollar in late morning dealing, rebounding to 1.01 from a 2-month low of 1.0150. The loonie fell sharply shortly after 9 am ET when the Bank of Canada revealed it is lowering its target for the overnight rate by a quarter point to 4.25 percent.

The Bank of Canada was under pressure from manufacturers to devalue the loonie by lowering interest rates. The loonie rallied to a modern-era record high near .90 a few weeks back, but fell from there amid indications its rally was overdone.

Source : http://www.rttnews.com/forex/currency_mkt.asp

BOC Cuts Interest Rates By A Quarter Point

Tuesday, December 04, 2007 9:21:00 AM - Tuesday morning, the Bank of Canada announced that it is lowering its target for the overnight rate by a quarter percentage point to 4.25 percent. This marks the Canadian central bank's first rate cut in over three years.

The bank's accompanying statement suggested that the decision to lower interest rates for the first time since April of 2004 was partly based on easing concerns about the pace of inflation.

While the Bank of Canada said that the Canadian economy has been growing in line with expectations due to strength in domestic demand, it noted that both total consumer price inflation and core inflation were below its expectations in October.

The tamer than expected inflation reflected increased competitive pressures related to the level of the Canadian dollar, the bank said, adding that it now expects inflation over the next several months to be lower than expected.

The bank noted that there continue to be upside risks to its inflation projection due to the strength of domestic demand and weak productivity growth, but it also said other developments since October suggest that the downside risks to its inflation projection have increased.

The Bank of Canada said, “Global financial market difficulties related to the valuation of structured products and anticipated losses on U.S. sub-prime mortgages have worsened since mid-October, and are expected to persist for a longer period of time.”

Subsequently, the bank said that there is an increased risk to the prospects for demand for Canadian exports as the outlook for the U.S. economy, and in particular the U.S. housing sector, has weakened.

Based on all these factors, the Bank of Canada said it determined that has been a shift to the downside in the balance of risks around its outlook for inflation through 2009.

The bank added that it would assess all economic and financial developments and the balance of risks when it makes its next interest rate decision on January 22.


Swiss Currency Strong On Tuesday Versus Majors [USD/CHF]

Tuesday, December 04, 2007 8:57:05 AM - The Swiss currency was mostly strong in trading against its world counterparts on Tuesday morning in New York. The franc moved with little news from the area.

The Swiss franc rose steadily against its American counterpart in trading on Tuesday. By the mid morning, the currency had advanced to a mark of 1.1179. The pair moved as no major economic reports are scheduled for release in the US. Wednesday, revised productivity for the third quarter is scheduled for release, along with October factory orders and November's ISM services index.

The Swiss currency rose against its British counterpart in trading on Tuesday into the mid morning. The franc climbed to 2.3054 versus the sterling. Overall, the currency is coming down off a recent weekly low.

In trading against the euro, the Swiss currency saw strength on Tuesday's mid morning action. The advance brought the franc to a mark of 1.6491 as action progressed. The currencies traded as the Eurostat announced that industrial producer prices rose 0.6% from the prior month in October, larger than the 0.4% in September. Economists had expected producer price inflation to climb at the same pace of 0.4% in October.

Versus the Japanese currency, the franc was strong in trading on Tuesday. As action moved into the mid morning, the Swiss currency rose to a mark of 98.21. The pair moved as it was announced that Japan's monetary base rose 1% year-on-year in November to 87.16 trillion yen. A year ago, the monetary base fell 22.3%. The seasonally adjusted monetary base grew 0.5% year-on-year in November, smaller than the 2.4% registered in October.

Source : http://www.rttnews.com/FOREX/FXTopStory.asp?date=12/04/2007&item=4

Forex - Canadian dollar slumps following interest rate cut

LONDON (Thomson Financial) - The Canadian dollar slipped sharply following the Bank of Canada's decision to cut interest rates.

The BoC cut interest rates a quarter point to 4.25 pct, saying global financial market difficulties meant its worries on inflation have subsided.

It added that there is 'an increased risk to the prospects for demand for Canadian exports as the outlook for the US economy, and in particular the US housing sector, has weakened'.

The news sent the Canadian dollar sharply lower as the market was split down the middle ahead of the decision, with just 50 pct forecasting a cut.

At 2.16 pm GMT the US dollar was trading at 1.10143 cad, after having been at 1.0055 cad shortly before the decision.

rachel.armstrong@thomson.com

Source : http://www.forbes.com/afxnewslimited/feeds/afx/2007/12/04/afx4402415.html

Forex - Yen Rises Against Major Currencies Amidst Credit Market Worries [USD/JPY]

12/4/2007 11:47:53 AM With trader concerns over global credit markets, the yen made gains on the major currencies in Tuesday morning New York trading.

The yen rose against the dollar in early morning trading before leveling off around 7:00 a.m. Eastern Time. The yen hit a multi-day high of 109.54 at 9:30 a.m. working its way back to November's multi-year high.

The yen climbed versus the euro Tuesday morning before retreating back into a range between 161.55 and 162.09. The yen had spiked up to 160.91 at 5:00 a.m. Eastern Time before paring back its gains.

The yen jumped versus the pound after Monday's uncertain trading. The yen sprang up to 226.10 at 5 a.m. E.T. after hitting a daily low of 227.93. The yen has leveled off around 226.00 near a multi-day high.

Japan's monetary base rose 1% year-on-year in November to 87.16 trillion yen, a report from the Bank of Japan showed Tuesday. A year ago, the monetary base fell 22.3%. The seasonally adjusted monetary base grew 0.5% year-on-year in November, smaller than the 2.4% registered in October.


Forex - Loonie Pares Some Of Its Early Losses As Traders Continue To Assess BOC Rate Cut [USD/CAD]

12/4/2007 11:22:56 AM The loonie pared its early losses against the dollar in late morning dealing, rebounding to 1.01 from a 2-month low of 1.0150. The loonie fell sharply shortly after 9 am ET when the Bank of Canada revealed it is lowering its target for the overnight rate by a quarter point to 4.25 percent.

The Bank of Canada was under pressure from manufacturers to devalue the loonie by lowering interest rates. The loonie rallied to a modern-era record high near .90 a few weeks back, but fell from there amid indications its rally was overdone.


Forex - New Zealand Currency Mixed Versus World Counterparts Tuesday []

12/4/2007 10:53:43 AM The New Zealand currency was mixed against the world majors in trading on Tuesday midday in New York. The kiwi moved as the Centre for Independent Studies reported that the average Australian earns more than their New Zealand counterpart.

The New Zealand currency was choppy against its American counterpart in trading on Tuesday. By the midday, the kiwi had bounced between a high of 0.7650 and below 0.7600. The pair moved with no major economic reports scheduled for release in the US. Wednesday, revised productivity for the third quarter is scheduled for release, along with October factory orders and November's ISM services index.

The New Zealand currency was weak in trading against the euro on Tuesday. By the midday, the kiwi had slipped past the 1.9330 mark. The currencies traded as the Eurostat announced that industrial producer prices rose 0.6% from the prior month in October, larger than the 0.4% in September. Economists had expected producer price inflation to climb at the same pace of 0.4% in October.

In trading against the sterling on Tuesday, the New Zealand currency saw choppy action. The kiwi moved between slightly above a high of 2.6950 and below 2.710 into the midday. The U.K.'s CIPS/NTC Purchasing Managers' Index in the construction sector dipped to 54.3 in November from 57.4 in October. The index eased to a fourteen month low.

Versus the Japanese currency, the New Zealand kiwi saw some weakness. The decline brought the kiwi below 83.40 in the midday, though it had recovered slightly as trading progressed. The pair moved as it was announced that Japan's monetary base rose 1% year-on-year in November to 87.16 trillion yen. A year ago, the monetary base fell 22.3%. The seasonally adjusted monetary base grew 0.5% year-on-year in November, smaller than the 2.4% registered in October.

A Centre for Independent Studies report showed Tuesday that the average Australian earns $12,000 a year more than the average New Zealander. According to TV NZ, researcher Phil Rennie said the gap is getting bigger and it has nothing to do with Australia's relative size. Rennie says government interference, over-regulation and high taxes are the main hurdles. New Zealand is now the highest-taxed English-speaking nation in the OECD, he added. According to Rennie, Australia has had tax cuts for the past five years, while New Zealand has increased its taxes, the TV NZ said.

Source : http://www.rttnews.com/FOREX/Currency_mkt.asp?date=12/04/2007&item=67

Euro rises against US dollar; Canadian dollar falls

LONDON (AFP) — The euro rose against the dollar on Tuesday while the Canadian dollar slumped after the Bank of Canada (BoC) surprised traders by cutting interest rates for the first time in three and half years.

The US dollar was weakened by comments made by Gulf Arab leaders about the peg of their currencies to the sliding US unit.

Though a two-day summit of the Gulf Cooperation Council (GCC) concluded with leaders pledging to maintain the peg, analysts said there were signs that some members wanted to follow Kuwait's example and use a basket of currencies instead.

In late European trading, the euro stood at 1.4757 dollars, up from 1.4666 late on Monday in New York.

Elsewhere, the dollar fell to 109.80 yen from 110.44 late Monday.

The US dollar rose to a session high of 1.0152 Canadian dollars after reaching a low earlier in the day of 0.9991 Canadian dollars. The Canadian dollar has risen by 25 percent this year against its US counterpart.

The BoC cut interest rates by a quarter basis point to 4.25 percent, saying global financial market difficulties and expectations of slower US growth meant its worries on inflation had subsided.

Forex markets also concluded that the BoC's accompanying statement made another interest rate cut in January likely.

Analysts said the surprise decision would help ensure that the Canadian dollar would not appreciate too sharply against the US dollar as the US Federal Reserve continues with its monetary easing.

"In order to keep the Canadian dollar from spiralling even higher, the BoC chose the lesser of two evils by cutting interest rates and thereby taking out some insurance against its currency becoming fundamentally misaligned," said Bank of New York senior currency strategist Michael Woolfolk.

Meanwhile at the GCC meeting in Doha, Gulf Arab leaders wrapped up their two-day summit after agreeing to maintain their currencies' peg to the US dollar.

The six also agreed to maintain a 2010 target date for the launch of a single currency.

Speculation of a de-pegging increases demand for free floating currencies such as the euro on the basis that the Gulf states could revalue their currencies against it and diversify their foreign reserves out of the dollar and into these other units.

Attention now turns to interest rate decisions in the eurozone and Britain on Thursday and then monthly US employment figures due on Friday.

The Federal Reserve is expected to cut rates again next week.

Investors are watching for the result of a meeting of the European Central Bank (ECB) on Thursday but most analysts expect no change to the central bank's key rate of 4.00 percent.

In Britain, the Bank of England is also expected to leave its main lending rate steady at 5.75 percent on Thursday.

In European trade on Tuesday, the euro changed hands at 1.4757 dollars, against 1.4666 late on Monday, at 162.03 yen (161.99), 0.7173 pounds (0.7095) and 1.6452 Swiss francs (1.6533).

The dollar stood at 109.80 yen (110.44) and 1.1176 Swiss francs (1.1274).

The pound was at 2.0577 dollars (2.0665).

In London, the price of gold firmed to 797.50 dollars per ounce from 784.25 dollars late on Monday.

Source : http://afp.google.com/article/ALeqM5jBt8kqOxQLWCUvNIFJMBxOgwmiSQ

Abu Dhabi to host Forex Expo and Conference

(MENAFN - Emirates News Agency (WAM)) Abu Dhabi will host the 2nd Middle East Forex Trading Expo and Conference taking place at Beach Rotana Hotel Abu Dhabi on 27th and 28th November.

Organisers Arabcom Group says the twin events will provide a platform for the guru?s from the most active and large Forex trading companies in the world to speak at the conference to educate and impart information to the attendees about the currency trading markets at the expo.

The event is aimed to give today?s investors more opportunities and choices as the Forex market is becoming more and more popular not just in the Middle East. The reasons are evident it?s a highly liquid Market, with 24 hours ? 5 days a week access around the globe plus an opportunity of leverage.

There are US$ 3.2 trillion trading hands every day and the advantage in monetary terms that people gain daily is phenomenal. This is not only true for speculations but also benefits businesses which depend on hedging their currency exposure, that is why sophisticated market platforms are becoming more and more important.

?Arabcom Group takes great pride in understanding the dynamic business issues of our customers, specifically their goals and objectives. That is why Arabcom Group tailored an event in regards with the currency market for its valued clients. The Middle East Forex Trading Expo & Conference is the means of acquiring knowledge and obtaining business relationships in the Forex industry ?

CEO of Arabcom Group Mrs. Katia Tayar? ?It is this expo's mission to create an avenue to promote an enhanced level of awareness on currency trading, cultivate learning among foreign exchange enthusiasts across all levels and ultimately encourage business in the marketplace,' said Jean Louis Farwagi ?

Vice President of Arabcom Group? ''There is a growing tendency among Middle Eastern investors to request online trading platforms that can support much more sophisticated and diversified trading strategies. These investors need a first class multi product platform to execute their strategies successfully,''he added.

The participation at the exhibition is from a highly diversified market from around the globe, companies from USA, UK, Switzerland, Cyprus, Denmark, Ireland, UAE and Singapore are going to showcase there expertise and there elaborate trading platforms.

Middle East Forex Trading Expo & Conference enables attendees to find more possible investment opportunities whereas Brokers meet Dealers and increase clientele.

Bankers, financial institutions, speculators, investors, teachers, university students, and other working professionals as well as beginners interested in trading currencies online, retired people, house wives, etc get an insight on what Forex trading is all about.

Source : http://www.menafn.com/qn_news_story_s.asp?StoryId=1093174837