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Article updated: 9/6/2011 8:33 AM

Kenya shilling gains for first day in four on bank meeting bets

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By Bloomberg News

Kenya's shilling strengthened for the first day in four on speculation the central bank will introduce measures to support the currency at its special meeting next week.

The currency of East Africa's biggest economy appreciated 0.2 percent to 94.55 per dollar by 2:42 p.m. in Nairobi, the capital.

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Kenya's monetary policy committee will hold a special meeting on Sept. 14 to review efforts to curb inflation and defend the shilling.

"The shilling has gained on the expectation that the central bank may act to support it when it holds its meeting next week," Wilson Mutai a dealer at Nairobi-based African Banking Corp., said in a phone interview.

The central bank cut its key lending rate in January and then raised it at the next two meetings to bolster the currency and curb prices. The bank surprised markets in July by leaving the benchmark at 6.25 percent, saying higher rates can't curb supply-led inflation. Last month it boosted charges for use of its discount window, a step it said was aimed at reducing speculation that is weakening the shilling, then reversed some of the increase after inter-bank borrowing costs soared.

"Having seen that the confusion on the supply side is subsiding, we can now assess the situation once more" at the meeting, Central Bank of Kenya Governor Njuguna Ndung'u said yesterday in an e-mailed response to questions.

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