Traders have suggested the shilling was likely to hover in the 89.80 to 90.30 range for the next few days. PHOTO | FILE
What you need to know:
By 0715 GMT, the shilling was trading at 90.05/15 to the US currency, little changed on Tuesday's close of 90.10/20.
The Central Bank of Kenya (CBK) said on Wednesday it was seeking to mop up Sh11 billion ($122.09 million) in excess liquidity from the money market, using repurchase agreements (repos) and term auction deposits.
Mopping up liquidity tends to make it more costly to hold dollars, which helps support the shilling.
Kenya's shilling was steady early on Wednesday with investors and companies holding back on dollar purchases and keeping the currency below levels where the central bank intervened last week to sell dollars. By 0715 GMT, the shilling was trading at 90.05/15 to the US currency, little changed on Tuesday's close of 90.10/20.
"We have seen buyers stay on the sidelines at levels above 90," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. "There is a fear the central bank could come in again as they don't seem to like these levels very much."
Traders said the central bank intervened with dollar sales on Friday at around 90.30, a move which helped strengthen the shilling to below the 90-mark. It has weakened again since then.
Traders have suggested the currency was likely to hover in the 89.80 to 90.30 range for the next few days. One trader at a commercial bank said he expected 90.50 to hold as a resistance level particularly as he said demand for dollars usually slowed towards the end of the year.
"Customers maybe would prefer to wait and see whether the central bank will do anything. So it is an issue of who will be the first one to pull the trigger," the trader said.
The shilling has weakened this year, in part because a drop in tourist arrivals has starved the market of a major source of dollars.
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