Shilling improves versus dollar
03 August 2015, 21:32
Nairobi - Kenya's
shilling strengthened against the dollar on Monday, helped by tight
liquidity and expectations that central bank will raise its lending rate
at its next meeting this week.
At 0726 GMT, commercial banks quoted the shilling at 101.60/80 to the dollar, from Friday's close of 102.35/45.
Traders said the shilling had strengthened due to tight
liquidity in the money markets, which had pushed interbank lending
The weighted average interbank lending rate rose to
19.2121 percent on Friday from 18.4628 percent a day earlier, and hit an
intraday high of 20 percent.
"We are looking at very tight liquidity for the
shilling, with overnight rates touching 20 percent on Friday. Tight
liquidity is helping out the shilling at the moment," said a senior
trader at one commercial bank.
The shilling had also gained on expectations that the
central bank will raise its benchmark lending rate at its meeting on
Aug. 5, traders said.
The central bank's Monetary Policy Committee (MPC) has
raised the rate by 3 percentage points since June, to 11.5 percent, to
offset the weakening shilling.
A Reuters poll of 11 analysts shows the rate is expected to rise to 12 percent.
"As we go to MPC meeting, we expect them to tighten
further. So most people who had long (dollar) positions are shedding
them," a trader at a second commercial bank said.
The central bank said it planned to mop up 11 billion shillings ($108 million) from the money markets on Monday.