Kenyan shilling weakens, importers weigh
30 May 2012, 14:38
Nairobi - The Kenyan shilling extended its losing streak against the
dollar on Wednesday on the back of demand for the U.S. currency from importers,
and was pressured further by high liquidity following government debt repayments.
Traders said the market was wary of a
further slide in the local currency, thanks to foreign investors cutting their positions
in the debt market after the 91-day Treasury bill yield
eased to a single digits last week.
At 0800 GMT, commercial banks posted the
local currency at 86.30/40 to the dollar, weaker than Tuesday's close of 85.90/86.10
and the lowest level since Jan. 18.
"The market has been panicky, because
the perception in the market is that the shilling will lose further based on
easing interest rates," said Jeremiah Kendagor, head of trading at Kenya
The central bank is due to sell 2 billion
shillings of 182-day Treasury bills later on Wednesday. The yield on the
6-month paper fell 116 basis points at last week's sale to 10.915 percent.
Traders expected the central bank to
continue with its intervention in the market by selling dollars to commercial
bank and draining excess liquidity, which was exerting pressure on the
shilling. The local currency has lost 0.9 percent this week.
The average interbank rate fell to 17.7
percent on Tuesday, from 18.4 percent a day earlier, signalling a build up of shilling
liquidity in the system.
Solomon Alubala, head of trading at
Co-operative Bank said the next target for the dollar was 86.50, adding that
the shilling would continue easing against the dollar, on the back of the shaky
international markets due to the eurozone crisis.