Kenya's shilling headed for the first weekly advance in four against the dollar as the central bank continued tightening currency supply.

The currency of East Africa's biggest economy appreciated as much as 0.5 percent to 85.23 per dollar and traded 0.2 percent up at 85.45 at 2:24 p.m. in the capital, Nairobi. The shilling has rallied 0.5 percent this week.

The central bank sold 1 billion shillings ($12 million) of repurchase agreements at an average rate of 5.75 percent, bringing the total sold since May 11 to 19.9 billion shillings, "keeping with the stance of monetary tightening," it said in a statement on its Bloomberg page today. Kenya's monetary policy committee is expected to announce its decision on interest rates on May 31.

"The continuous mopping up is curbing money supply and the market expects the central bank rate to be raised, a further indication of the monetary-tightening policy being enforced to rein in on inflationary pressure," Joshua Anene, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said in a phone interview today.

The MPC unexpectedly increased the key lending rate by a quarter of a percentage point to 6 percent at its last meeting on March 22, following eight reductions between December 2008 and January 2011. Inflation accelerated for the sixth straight month in April to 12.05 percent in April, the highest in two years and above the government’s 5 percent target, as food and fuel prices rose.

“The market expects the central bank rate to be raised by a minimum of 50 basis points to 6.75 percent and guided by the rising yield on government securities,” Anene said. The monetary policy committee will meet on May 31.

The market expects the central bank rate to be raised by a minimum of 50 basis points to 6.75 percent and guided by the rising yield on government securities," Anene said. The monetary policy committee will meet on May 31.

Yields on 91-day bills climbed to 7.94 percent at an auction yesterday, the highest since January 2009. Yields also increased on 2-, 10-, and 20-year bonds sold on May 25.