Commercial banks were quoting the currency at an average of 102.65 units to the greenback at 2.52pm, according to live trading data tracked by Reuters.
That was firmer than 102.7 units on Monday, 102.8 last Friday and 103.1 last Thursday close of business, which was an 11-month low last seen on January 9.
The shilling on Tuesday strengthened against the dollar for the third day in a row largely informed by tighter liquidity in the market amid a slight uptick in flows from horticultural exports and diaspora remittances, traders said.
Commercial banks were quoting the currency at an average of 102.65 units to the greenback at 2.52pm, according to live trading data tracked by Reuters.
That was firmer than 102.7 units on Monday, 102.8 last Friday and 103.1 last Thursday close of business, which was an 11-month low last seen on January 9.
“It’s basically driven by tight liquidity (partly due to tax payments) in the market and also profit taking by banks, which has eased the demand,” said a forex trader at a tier-one bank.
The shilling, the dealers said, was likely to exchange at between 102.40 and 103.20 units against the dollar in the near future.
“As holidays approach demand by importers is likely to reduce while diaspora remittances will increase. This will see the currency remain range-bound,” another currency dealer at a fund manager said.
A stable shilling helps ease pressure on the cost of living because Kenya remains a net importer of petroleum products largely consumed in transportation and raw materials for manufacturing sector.
Imports in the nine months through September, for example, hit Sh1.33 trillion against Sh470.57 billion in exports earnings, the Kenya National Bureau of Statistics (KNBS) data released last Friday show.
A weaker shilling against major international currencies, on the other hand, implies increased income for exporters of farm produce such as tea, horticulture and coffee who largely earn dollars and Euros.
The Central Bank of Kenya (CBK) has the option of deploying its sizeable but dwindling foreign exchange reserves to support the shilling but this action is increasingly becoming limited as the regulator keeps an eye on the external debt servicing demands that are drawn out of the same reserve basket.
Kenya’s foreign exchange reserves dropped $89 million (Sh9.14 billion), or 1.09 per cent, to $8.063 billion (Sh828.07 billion) last Thursday compared with $8.152 billion (Sh837.21 billion) a week earlier.
Although the reserves remain sufficient at 5.34 months of import cover against a statutory a four-month requirement, the stock is the lowest since $7.155 billion (Sh732.67 billion) on March 8.
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