Shilling loses against dollar, stocks slide

The Kenyan shilling lost ground against the dollar on Friday, though still clinging to its recent tight range, and falling Treasury yields could put further pressure on the currency, market players said. Kenyan stocks fell marginally.

At the close of trade at 1300 GMT, commercial banks quoted the shilling at 87.75/85 to the dollar, compared with Thursday's close of 87.70/80 but within the 87.50-88.00 range it has been stuck in for weeks.

Traders said the shilling could take its cue from a drop in interest rates on Treasury bills, which have been coming off this month after rising by just over a percentage point last month due to higher weekly borrowing by the government.

"There is an indication that rates may come off at least in the short run and that might affect the currency," Chris Muiga,a trader at National Bank, said.

Lower interest rates normally make it slightly cheaper for banks to fund long dollar positions thus putting pressure on the shilling.

READ: High liquidity in debt market pushes down Treasury bill interest rates

But Muiga said the shilling was not likely to weaken past the 88.00 level, because the central bank has shown it is not keen on such a move by pumping dollars into the market recently whenever the shilling has threatened to fall through that level.

"I don't think the market wants to test their resolve," he said.

John Njenga, a trader at Commercial Bank of Africa, said that in the next few days dollar supply and demand was expected to be matched in the market.

"There is genuine demand from all over the sectors, but there are also inflows which are supporting it," Njenga said.

On the Nairobi Securities Exchange, the main NSE-20 Share Index dipped 3.01 points to close at 4,910.60 points.

On the secondary market, government bonds valued at Sh2.23 billion were traded, up from Sh1.69 billion ($19.24 million) traded on Thursday.