Kenya shilling dips, tight liquidity to add support
03 February 2012, 13:10
Nairobi - The Kenyan shilling dipped on Friday on the back of selling by the energy and industrial sectors, but traders said tight liquidity and increased dollar inflows could support it later in the session.
The central bank in east Africa's biggest economy has kept supply of the local currency limited as part of a campaign to halt a dramatic slide in the shilling last year that has also seen it raise interest rates to 18 percent.
At 0732 GMT, commercial banks quoted the shilling at 84.00/20 against the dollar, weaker than Thursday's close of83.75/95.
"We saw some demand from the energy and industrial guys from yesterday evening and it has trickled into today's trading," said Bhavin Chandaria, a trader at Imperial Bank.
"We don't expect this to be sustained because of the tough liquidity situation in the market."
Traders said they expected the shilling to trade in the 83.50-84.50 range during the session.
They said dollar inflows from offshore investors attracted by high yields in government securities would support the shilling, but noted that congestion at the port city of Mombasa was affecting tea exports.
Tea is ranked as one of the largest hard currency earners for an economy that is dependent on farming.
High charges and delayed clearance have seen cargo at the Mombasa port reach crisis levels, prompting authorities to declare a three-month waiver between January and March.
"There is a wall of dollars on the sidelines just waiting for government securities auctions. This will support the currency in coming days despite congestion at the port affecting tea sales," said a trader at one commercial bank.
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