Markets & Finance

Shilling firms as corporate demand for dollars subdues

dollar shilling

Kenya's shilling firmed in early trading on Monday. PHOTO | FILE

Kenya's shilling firmed in early trading on Monday with corporate demand for dollars subdued.

By 0656 GMT, the shilling was quoted at 105.15/35 to the dollar, slightly stronger than Friday's close of 105.30/40.

The central bank sold dollars last week, helping the shilling recover after almost touching an all-time low of 106.80, set in October 2011. Since then, it has steadied.

Corporate demand for dollars tends to pick up towards the end of the month when regular payments for contracts fall due. For now, traders said dollar supply and demand was balanced.

One trader, who asked not to be identified, noted some firms were holding on to shillings to meet a tax payment deadlines later this week, offering some support to the currency.

CBK action

Central bank said it planned to mop up Sh10 billion ($95.1 million) in excess liquidity from the money markets.

The bank uses term auction deposits and repurchase agreements to take out the liquidity, which makes it costly to hold onto dollars and in turn lends support to the shilling.