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Shilling trades at more than three-year lows

The central bank has on occasion intervened
The central bank has on occasion intervened with dollar sales in recent weeks but that has not stopped the currency's depreciation for long. PHOTO | FILE 

Kenya's shilling weakened slightly on Wednesday to lows last seen more than three years ago. Traders said the slide was prompting more demand for dollars from businesses wary of a further dip.

"The significant thing to note here is we have broken the 91 level (to the dollar)," said Nahashon Mungai, a trader at Kenyan Commercial Bank. "The sentiment has already shifted for a weaker shilling."

By 0741 GMT, the shilling was trading at 91.00/91.10, edging down from Tuesday's close of 90.90/91.00. The last time the shilling traded at these levels was in late 2011.

The stab at the 91-level was prompting some extra demand from companies and other investors concerned that the currency would slide further, traders said. Any dollar sales by the central bank might slow but not halt the slide, they said.

"Anybody who is short (of dollars) is covering on the interbank market," said one dealer who asked not to be named. Another said the 91.50 level was now in sight.

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The central bank has on occasion intervened with dollar sales in recent weeks but that has not stopped the currency's depreciation for long.

The shilling weakened steadily last year in part because of a downturn in tourism following a series of Islamist militant attacks. Tourists are a major source of dollars and other hard currencies for the country.

CBK action

Central bank later said it was seeking to mop up Sh7 billion ($77 million) in excess liquidity from the money market using repurchase agreements, or repos, and term auction deposits.

By mopping up excess liquidity, the central bank makes it more costly to hold dollars, which tends to support the shilling .

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