Shilling gets support from agricultural export inflows

The Kenyan shilling firmed against the dollar yesterday, helped by agricultural exporters, mainly from the tea sector, selling dollars and the central bank absorbing liquidity, while stocks fell through the key 3,800 point level.

At the 1300 GMT markets close, commercial banks quoted the shilling at 83.75/95 per dollar, 0.3 per cent firmer than Friday’s close of 84.00/20.

“There were some inflows from the agriculture guys, particularly the tea sector and development agencies,” said Mr John Muli, a trader at African Banking Corporation.

The shilling has gained 1.7 per cent this year due to the central bank’s tight monetary policy stance and traders said it could touch 83.50 per dollar this week, helped by the central bank mopping up liquidity using repurchase agreements (repos).

During Monday’s session, the central bank mopped up three billion shillings ($35.7 million), after it received bids worth 8.22 billion for the three billion shillings it had offered.

Traders said they expected the central bank to continue soaking up liquidity via repos to support the shilling after the weighted interbank interest rate fell to 9.4 per cent on Friday from 14.1 per cent late last month, posing a downside risk to the currency.

“The central bank seems to want the rates to come down ... probably they are psychologically preparing the market for a rate cut,” Muli said.

The Central Bank of Kenya is scheduled to hold its next policy meeting on Sept 5.