Shilling slightly stronger against dollar, markets unchanged
Traders said the shilling could come under pressure next week when the government releases funds and importers demand dollars for end-month trade. Photo/FILE
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Commercial banks posted the shilling at 87.65/75, compared to 87.80/90 the previous day.
Traders said the shilling could come under pressure next week when the government releases funds.
The benchmark NSE-20 share index, was barely changed, shedding a modest 4.67 points.
The Kenyan shilling strengthened marginally against the dollar on Friday while the benchmark shares index was little changed.
At the 1300 GMT close of trade, commercial banks posted the shilling at 87.65/75, compared to 87.80/90 the previous day. One currency trader attributed the move to a liquidity squeeze in the money markets due to a delay in the release of government funds to local authorities.
The weighted average interest rate on the overnight borrowing market for banks rose to 7.8038 per cent on Thursday from 7.6651 per cent the previous day. Tighter liquidity in the money markets usually makes it slightly more expensive for banks to fund long dollar positions, cushioning the shilling.
Traders said the shilling could come under pressure next week when the government releases funds combined with the traditional end-month demand for dollars by importers.
"We might see liquidity improve next week," said a trader with a leading commercial bank.
The shilling has been stuck in a tight band of 87.50-88.00 for weeks, with worries over militant attacks limiting its gains. The central bank has also signalled it does not wish to see it slip below the 88.00 level.
On the stock market, the benchmark NSE-20 share index, was barely changed, shedding a modest 4.67 points to close at 4,879.09 points.
"It has been treading water," said Aly Khan Satchu, an independent trader and analyst, adding that investors were still waiting for interest rates to fall after the country issued its debut Eurobond last month before shifting out of cash.
Kenya borrowed $2 billion (about Sh175 billion) via the Eurobond issue at lower than expected interest rates but that has yet to trickle into the domestic market, where lending rates remain obstinately high.
Shares of Safaricom, Kenya's largest telecoms operator, rose 1.67 per cent to 12.20 shillings each after a parliamentary committee approved the award of a key security system contract by the government to the firm.
In the debt market, bonds worth Sh2.79 billion were traded, slightly up from the previous day's volume of Sh2.66 billion.
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