NAIROBI (Reuters) - The Kenyan shilling firmed against the dollar on Thursday, buoyed by increased greenback inflows from offshore investors buying government securities, while stocks rose for the third straight day to near a three-week high.
High yields on government securities have fuelled foreign demand, especially for short-dated paper, leading to high subscription rates and bringing dollars into the country.
At close of markets at 1300 GMT, the shilling was quoted by commercial banks at 82.60/80, stronger than Wednesday's close of 82.90/83.10.
The shilling, which is up 2.8 percent this year, had risen to an intraday high of 82.30/50 to the dollar.
"Inflows from offshore guys due to bond interest strengthened the shilling," said Julius Kiriinya, a trader at ABC Bank.
"But that triggered customers (importers) to buy dollars."
Kenya's one-year Treasury bond auctioned on Wednesday forced the weighted average yield lower to 18.030 percent from 21.082 a month earlier, and the central bank said the paper had attracted a 348 percent subscription rate.
Technical charts showed the shilling's resistance level at 82.50 per dollar and a break below it could usher in highs of 81, traders said, a level last seen more than a year ago.
"Foreign flows coming into the bond market caused a rally in the shilling this morning, before profit-taking by interbank players weakened it a bit," said Dickson Magecha, a trader at Standard Chartered Bank.
They said the local currency could strengthen further aided by rising interest rates in the money market, as banks compete for the few shillings available, as well as inflows from tea - the east African country is the world's top exporter of black tea.
On the Nairobi bourse, the main NSE 20-Share index inched up 0.3 percent to 3,208 points, near a three weeks high, lifted by positive sentiment from investors due to strong performance of most companies that have announced their full year performance.
"Its earnings season and every company so far has announced good performance. That is what has attracted investors," Johnson Nderi, a trader at Suntra Investment said.
NIC Bank was the top gainer of the day, outshining all banks after its share price shoot up by 20 percent to 30 shillings, following a 38 percent pretax profit rise for 2011 to 3.6 billion shillings
Government bonds worth 2.52 billion were traded up from 683.6 million shilllings.
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