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Kenyan shilling steady after interest rate left unchanged

04 September 2013, 13:13

Nairobi - Kenya's shilling held steady on Wednesday in the first trading session after the central bank left its key lending rate on hold, with traders forecasting the local currency would remain in a narrow range.

The Central Bank of Kenya met market expectations when it kept its benchmark interest rate unchanged at 8.50 percent on Tuesday, saying inflation was contained within an acceptable margin of its medium term target.

"There are flows on both sides so there is no clear (shilling) direction for now," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

Commercial banks quoted the shilling at 87.50/60 at 0730 GMT, unmoved from Tuesday's close. Market players forecast the shilling would trade in a range of 87.30 to 87.70.

Bank of Africa said the shilling might firm a touch in the coming sessions if dollar demand remained subdued. Looking further ahead, though, traders said the shilling looked set to remain bearish.

"If (T-bill) rates remain at double digits then we may see the shilling contained," Kinuthia said. However, if they come down we may see the shilling come under pressure."

Yields on Kenya's 91-day Treasury bill crept up to 10.474 percent last week from 10.462 percent a week earlier.

Ahead of Tuesday's rate decision, some traders said a hold would leave interest yields looking less attractive in an inflationary environment, which they said might lead to money exiting as investors held back from rolling over maturing paper.

A Reuters poll last month predicted Kenya would leave its key rate at 8.50 percent until at least the end of the year.

- Reuters


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