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Dollar demand weakens shilling further

22 September 2015, 10:21

Nairobi - Kenya's shilling lost ground on Monday as energy and telecoms companies sought dollars, but traders said tight liquidity was keeping the local currency from weakening further.

At 0714 GMT, commercial banks quoted the shilling at 105.30/50 to the dollar, compared with Friday's close of 105.15/25.

"It all boils down to fundamentals rearing its head: (dollar) demand. The people who can afford right now are the telecoms and energy. Most other people are on the sidelines," a senior trader at one commercial bank said.

The trader said the shilling was getting some relief from tight liquidity, which had led to rising interbank lending rates. Tight liquidity makes it expensive to hold dollars.

The weighted average interbank rose to 24.5569 percent on Friday, from 23.3978 percent on Thursday.

"The (overnight) rate scenario is the one which is giving us some respite. Now we are seeing 25 percent, 26 percent," the trader said.

A trader at another bank said the shilling would trade in a tight range ahead of the central bank's Monetary Policy Committee Meeting on Tuesday.

Thirteen of 15 analysts polled by Reuters poll forecast that the central bank will keep its main interest rate at 11.50 percent on Tuesday.

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- Reuters


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