The shilling continued with its up-and-down start to the year Monday, ceding some of the gains made last week against the dollar as heavy liquidity weighed on the market.
Commercial banks quoted the shilling at an average of 101.10 to the dollar in afternoon interbank trading, compared to Friday’s closing average of 100.94.
It had touched 101.45 last Wednesday before rallying at the end of the week on the back of a liquidity mop-up by Central Bank of Kenya.
Since the beginning of the year, the shilling has traded in a narrow band of 100.90 and 101.60 units to the dollar, unable to sustain any gains or declines as dollar inflows and high liquidity levels cancel each other out.
“The shilling showed resilience, supported by tax-week flows and liquidity mop-up by the regulator (last week). This week, we see competing forces taking centre stage in the local currency market, limiting the movement of the home unit against the greenback within familiar ranges,” said NCBA in a treasury note yesterday.
Traders told news agency Reuters yesterday that they were seeing support from horticulture export inflows and portfolio investors buying stocks and government debt.
At the same time, however, CBK reported that the market was heavily liquid, reflected in the large bids on repurchase agreements (repos) floated by the regulator yesterday and Friday.
CBK data showed while the regulator was in the market Monday for Sh15 billion worth of repos, investors bid a total of Sh41.25 billion, with CBK accepting Sh15 billion.