The shilling closed Friday on a stronger footing against the dollar as diaspora remittance inflows offered support.
Traders quoted by news agency Reuters said that there was a fall in dollar demand from energy sector players, whose trading activity tends to have a significant impact on the exchange rate due to the bulk nature of their buys.
Commercial banks quoted the shilling at an average of 103.80 in afternoon trading on Friday, having opened the week at an average of 103.89 units.
“Dollar supply sufficiently met demand from the manufacturing sector … dollar buyers retreated to the sidelines, tipping the scales in favour of the local unit to close on the front foot albeit marginally,” said Commercial Bank of Africa in a market note on Friday.
In the coming week, business people say the shilling is likely to continue trading in a tight range against the dollar absent of any market shaking news.
Central Bank has also shown a willingness in recent weeks to mop up liquidity heavily, which would support the stability of the shilling in case volatility starts to creep in.