Kenya shilling holds steady before inflation data
28 November 2013, 14:41
Nairobi - The Kenyan shilling was stable against the dollar on Thursday as the market waited for November inflation data to get a reading on the potential direction of interest rates.
At 0715 GMT, leading commercial banks posted the shilling at 87.00/10 per dollar, unchanged from the previous day's close.
Under pressure from a surge in dollar demand last week, the currency weakened past its key support level of 86.50 to the dollar amid improved liquidity in the money markets that made it slightly cheaper for banks to fund dollar positions.
Traders said there would be little movement until Friday when the government will issue consumer inflation data for this month.
"We expect a slight dip in inflation," said Nahashon Mungai, a trader at KCB Bank, adding that could cause the shilling to remain soft, as it indicates dollar funding will continue to be within reach.
The year-on-year inflation rate dropped to 7.76 percent in October after a big jump in the previous month due to the effects of a new law on sales tax.
Banks were, however, shying away from taking substantial positions before the holidays, which could offer a reprieve to the currency, traders said.
"If this sort of scenario was playing out in September, the move would had been much more drastic but there isn't much activity on the interbank market," Mungai said.