Importers push Kenyan shilling lower
Posted Friday, September 7 2012 at 12:36
- The Kenyan shilling fell slightly against the dollar for a second straight session on Friday as banks cleared outstanding demand for dollars
- Some economic analysts say there is scope for the central bank to cut another 4 percentage points in total off its main lending rate.
The Kenyan shilling fell slightly against the dollar for a second straight session on Friday as banks cleared outstanding demand for dollars from the country's importers following a record rate cut on Wednesday, traders said.
At 0810 GMT, commercial banks quoted the shilling at 84.40/60 per dollar, leaving it still stronger than its level ahead of the central bank's 350 basis point interest rate cut, but a touch weaker than Thursday's close of 84.30/50.
The shilling firmed immediately after the rate cut when banks which had bet on an even more aggressive loosening snapped up shillings.
Market players said they expected the Central Bank of Kenya to continue soaking up liquidity through repurchase agreements.
"We saw a number of importers coming in to pick dollars yesterday and that has trickled through a bit to today. But we expect the shilling be supported at this level," said Robert Gatobu, a trader at Bank of Africa.
The bank has actively mopped up liquidity in recent months using repurchase agreements (repos) and occasional sales of dollars to support the local currency.
Raphael Owino, a senior trader at Commercial Bank of Africa said: "The interest rate outlook will be the key driver of the currency. The question is how will lower rates affect it (the shilling) and how will the central bank react?"
Some economic analysts say there is scope for the central bank to cut another 4 percentage points in total off its main lending rate.
Kenya's foreign exchange reserves hit a record high of $5.12 billion last week, equivalent to 4.14 months worth of import cover, giving policymakers more room - in terms of any threat to the shilling - to lower rates. (Reuters)