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Kenya shilling eases slightly but seen holding steady

05 December 2013, 12:52

Nairobi - The Kenyan shilling weakened marginally on Thursday but traders anticipated it would hold its ground, with pressure from importer dollar demand seen offset by expectations the central bank will mop up liquidity.

At 0802 GMT, commercial banks quoted the shilling at 86.50/70 to the dollar, compared with Wednesday's close of 86.45/55.

"Today we are getting (dollar) orders from importers coming in to take advantage of what they perceive as attractive rates," a senior trader at one commercial bank said.

"So on one hand we have importer demand and on the other hand we have central bank mopping up excess shillings from the market. And we see the importer demand counterbalancing the effects of the central bank."

On Wednesday, the central bank mopped up 10 billion shillings in excess liquidity from the money markets using repurchase agreements, at a weighted average rate of 8.181 percent.

Tightening liquidity makes it relatively more expensive to hold onto long dollar positions, which in turn makes the shilling strengthen.

Traders said the shilling, which is 0.5 percent weaker against the dollar in the year to date, is likely to trade in the 86.00 to 87.00 range in coming days.

- Reuters


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