Kenyan shilling firms a touch as dollar demand eases

Kenya's shilling firmed on Tuesday as end of month demand for the dollar eased and investors trimmed back their long dollar positions anticipating slack demand for the greenback.

At 0840 GMT, commercial banks quoted the shilling at 87.65/75 to the dollar against Friday's close of 87.85/95.

Markets were closed on Monday during a national holiday.

Traders said they expected the currency of east Africa's biggest economy, which has lost about 1.7 per cent against the dollar so far this year, to trade in the 87.50 to 88.00 range this week.

Duncan Kinuthia, head of trading at Commercial Bank of Africa, said end-month demand for the greenback from corporate clients had tapered off, easing pressure on the local currency.

At the same time, some investors had squared their positions on Friday, further strengthening the shilling. "People cut their long (dollar) positions and that gives the local unit a reprieve," he said.

Traders had also anticipated the Central Bank of Kenya would maintain its policy of absorbing excess liquidity to support the shilling. Taking shillings out of the market helps lift the
overnight lending rate, making it more expensive for banks to hold long dollar positions.

The central bank said it was in the market to drain 15 billion shillings ($170.94 million) of excess liquidity from the money market on Tuesday.

($1 = 87.7500 Kenyan Shillings)