Kenyan shilling steady as importers keep eye on Central Bank
02 December 2013, 12:04
Nairobi - Kenya's shilling held steady on Monday as importers waited to see if the central bank would try to keep the local currency from extending its fall, traders said.
The shilling weakened 3 percent in the five weeks to the end of November as a liquidity crunch eased and importers stockpiled goods before the December holidays. It firmed on Friday when banks unwound long dollar positions after the central bank began asking why the shilling was falling, prompting speculation the regulator was preparing to sell dollars.
"Most of the importers are for the time being just sitting on the fence trying to see whether there is any possibility the currency might appreciate," said Ignatius Chicha, head of trading at Citibank. But it looks like liquidity is improving. That might just put brakes on any further shilling appreciation."
At 0823 GMT, commercial banks quoted the shilling at 86.45/65 to the dollar, the same as Friday's close.
In a sign of increased liquidity, the weighted average interbank lending rate fell to 9.3020 percent on Friday from 9.5762 percent a day before. Rising liquidity makes it cheaper to hold long dollar positions.
"The shilling may be looking to strengthen a bit. This is actually on the back of demand kind of tapering off as we come closer to the holidays," said a senior trader at one commercial bank. "The threat of intervention is still alive, and so many people are sitting cautious in terms of what positions to take. You don't want to take huge positions at the moment."