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Kenya shilling firms but selling pressure seen

20 January 2012, 13:06

Nairobi - The Kenyan shilling firmed for a sixth straight day on Friday after banks sold dollars to square positions ahead of the weekend, but traders said the currency's 2 percent gain this week could prompt importers to buy dollars.

This week's rally was mainly due to the central bank's intervention in the money markets to mop up liquidity through repurchase agreements to defend the shilling. At 0716 GMT, commercial banks quoted the shilling at 85.55/75 to the dollar, slightly up from Thursday's close of 85.70/90.

"Some banks were sitting long (dollar), so it's just a bit of position squaring ahead of the weekend," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. "At these levels we are starting to see interested buyers so we could still slide back up towards 86 again."
Traders said the shilling was also tracking the euro, which strengthened overnight as concerns about the euro zone debt crisis eased slightly and on signs of steadier global economic growth.

They said an impending International Criminal Court ruling on Kenya's 2007-08 post-election violence would have very little impact on the shilling as investors had already priced that into the exchange rate.

"We've seen the euro gaining across the board on a positive risk sentiment ... and that feeds into emerging currencies like the shilling," said Dickson Magecha, a trader at Standard Chartered Bank.

"When we look at the ICC, we'd be looking at the political risk, and I think the political risk has always been primed into the Kenya shilling, being an election year."


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