Inflows of dollars ahead of government securities auctions propped up the Kenyan shilling against the dollar on Tuesday, helping to offset greenback demand from exporters.
At 0742 GMT, commercial banks quoted the shilling at 82.65/85 against the dollar, barely changed from Monday's close
"There is some end-month dollar demand which is evenly matched by the good flows from the debt market. That's why we're
stuck at this level," said Sameer Lagadia, head of trading at Diamond Trust Bank.
"We still have a lot of dollar supply coming through from bond buyers and interbank selling. The shilling will remain bullish despite the lack of tea inflows," Lagadia said.
Kenya, the world's top exporter of black tea, said a tax row that led to Monday's tea auction being called off could disrupt
another sale due on Tuesday. Tea exports are a major source of hard currency for Kenya.
The central bank's raising of interest rates to 18 per cent has drawn foreign investors to Kenyan debt, turning round one of
the emerging world's worst currency collapses last year.
Technical charts showed the shilling's resistance level at 82.50 per dollar, traders said.
The Central Bank of Kenya is due to sell 3 billion shillings ($36.3 million) of 182-day on Wednesday and 4 billion shillings of 91-day bills on Thursday.
In the money market, the weighted interbank lending interest rate rose to 23.1 percent on Monday, from 22 per cent on Friday,
as banks competed for the few shillings in the market.
"The liquidity tightness has been caused by the bond auctions. Guys are not able to hold long dollar positions and that's why the shilling is stabilising," said John Muli, a trader at African Banking Corporation.