Shilling stable, awaiting CBK action
13 August 2013, 14:50
Nairobi - The Kenyan shilling was steady early on Tuesday, with traders keeping an eye out for movement after Central Bank of Kenya injected liquidity in the previous session for the first time in nearly two years, weakening the local currency.
The bank on Monday injected 12.9 billion shillings into the money market using reverse repurchase agreements (repos), at a weighted average rate of 8.921 percent. It had sought to inject 18 billion shillings.
The shilling stood at 87.60/70 per dollar by 0717 GMT, barely changed from Monday's close of 87.55/75.
"Most people are waiting to see if there is a repeat of what the central bank did yesterday," said Peter Mutuku, head of trading at Bank of Africa.
Typically, when the central bank releases shillings into the market it makes it cheaper to hold long dollar positions weighing on the local currency.
In its latest weekly bulletin, the central bank said that shilling liquidity had been tight as the regulator was holding vast government funds which will go towards payments after the start of a new financial year in July.
The reverse repos weakened the shilling out of a tight range of 87.25-87.55 it was stuck in for nearly two weeks, underpinned by rising interest rates in the money market and short term debt yields.