Markets & Finance

Kenyan shilling eases on importer demand, CBK comment

shilling

So far this year, the shilling is down 11.5 per cent against the dollar but still off a 3-1/2-year low of 103.85/95 hit in mid-July. PHOTO | FILE

The Kenyan shilling weakened on Tuesday due to importer dollar demand from oil companies as well as comments by the central bank reiterating that it had no preferred level for the local currency.

At 0652 GMT, commercial banks quoted the shilling at 102.20/40 to the dollar, compared with Monday's close of 101.75/85. Traders however said that rising interbank lending rates were limiting the shilling's weakening.

The weighted average interbank lending rate rose to 17.2699 per cent on Monday from 16.9627 per cent on Friday, and hit an intra-day high of 18 per cent.

"There is demand for the dollar, but still in the money market it's still tight, so that is what is containing it from losing further," a trader at one commercial bank said. "From my side I have seen some oil companies asking (for dollars)."

Traders said the shilling had also reacted to the central bank governor's comments that the bank was focused on taming exchange rate volatility but had no optimal level for the shilling.

"It's due to the central bank governor's comments. I think the market is taking a cue from that, they may not be that keen to intervene, and it's (shilling's) positioning itself appropriately," a senior trader at a second commercial bank.

READ: Njoroge says shilling’s fall beyond CBK control

So far this year, the shilling is down 11.5 per cent against the dollar but still off a 3-1/2-year low of 103.85/95 hit in mid-July.

On Tuesday, the central bank said it planned to mop up Sh2 billion ($20 million) in excess liquidity from the money markets.