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Steady shilling bears on

14 August 2013, 12:47

Nairobi - The Kenyan shilling was steady on Wednesday with traders expecting it to come under pressure due to loose liquidity after the Central Bank of Kenya (CBK) increased supply in the money market.

By 07:14 GMT, commercial banks quoted the shilling at 87.60/80 per dollar, the same level it closed at on Tuesday.

Traders said the shilling's near-term outlook was bearish due to increased supply in the market after the central bank injected liquidity in the last two straight sessions using repurchase agreements, which weakened the currency on Monday and Tuesday.

"The central bank's injections seem to have worked since the interbank rate is coming down," said John Muli, a trader at African Banking Corporation.

The regulator's shilling sale helped to ease the overnight interbank lending rate for the first time in 18 sessions to 8.8 percent on Tuesday from 10.3 on Monday.

Typically, when the central bank injects liquidity into the money markets, it makes it cheaper to hold long dollar positions, putting pressure on the shilling.

"Further central bank easing actions through reverse repos could however open the unit to further losses beyond the 88 mark," said Commercial Bank of Africa in a daily note.

- Reuters

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