Shilling firms as banks shed dollars
04 October 2013, 13:22
Nairobi - The shilling firmed on Friday as tight supply of the currency pushed commercial banks to switch U.S. dollars into shillings ahead of the weekend.
The shilling was posted at 86.20/40 per dollar by 0738 GMT, stronger than Thursday's close of 86.40/60.
"Most players are not willing to fund their long dollar position because the market has been persistently tight," said Nahashon Mungai, a trader at Kenya Commercial Bank.
Liquidity has tightened in the interbank market as Kenyan companies are paying their latest tax instalment, lifting the weighted average interest rate to 9.8 percent on Thursday, from a low of 6.3 percent on September 6.
Traders said they expected the shilling to trade in the 86.00-87.00 range in coming days with a bias to firming further partly due to inflows from foreign investors buying an extended 12-year infrastructure bond.
The bond issue was oversubscribed at an auction last month before the central bank offered it again through a tap sale for the next three months to raise an additional 16 billion shillings.
"With more inflows expected from offshore investors over the next two months the shilling is expected to close the year on a positive note," said Bank of Africa in a daily note.