Kenya shilling flat, seen weakening on energy demand for dollars
Kenyan shilling was flat on Friday, but traders said it was likely to weaken on rising dollar demand from the energy sector and excess liquidity. Photo/FILE
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Traders said the Central Bank of Kenya was likely to mop up excess liquidity, as it has done since last week. Excess liquidity makes it cheaper to hold long dollar positions, weakening the shilling.
Kenyan shilling was flat on Friday, but traders said it was likely to weaken on rising dollar demand from the energy sector and excess liquidity.
At 0800 GMT, commercial banks quoted the shilling at 86.45/55 per dollar, from Thursday's close of 86.40/50.
Traders said the Central Bank of Kenya (CBK) was likely to mop up excess liquidity, as it has done since last week. Excess liquidity makes it cheaper to hold long dollar positions, weakening the shilling.
"Two fundamentals are driving the market, demand and supply for dollars and the fact that the market is fairly liquid," Commercial Bank of Africa trader Joshua Anene said.
"There is increasing demand from the energy sector. It is likely we could be headed for a weaker shilling level by the time the market closes."
Traders said CBK had consistently mopped up excess liquidity since last week and was expected in the market. By mopping up liquidity, the bank makes it relatively costlier to hold onto long dollar positions, which in turn helps strengthen the shilling.
On Thursday, the bank absorbed Sh6.95 billion ($80.37 million) from the market using repurchase agreements at a weighted average rate of 6.375 per cent, a day after draining another Sh6.1 billion.
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