Kenyan shilling weakens on rising dollar demand

The Kenyan shilling weakened on Wednesday due to rising dollar demand by energy companies, manufacturers and banks covering their short-dollar positions while inflows were scant.

At 0811 GMT, commercial banks quoted the shilling at 88.05/88.15 to the dollar, recovering from an intra-day low of 88.10/88.20. The shilling had closed at 87.95/88.05 on Tuesday.

"There has been weakness in the shilling due to corporate demand and short-covering by banks, which forced it to break the 88 level," Nahashon Mungai, trader at KCB Bank Group, said.

Traders said easing liquidity and the low level of dollar inflows into the market were also putting pressure on the currency of east Africa's biggest economy.

The shilling has weakened since Friday, when banks started buying the greenback after signs that a domestic funding crunch was easing. Overnight interbank borrowing rates had risen over the past two weeks, when the government delayed releasing funds to departments and local authorities.

The central bank injected funds into the market from Tuesday to Thursday last week to alleviate the crunch. .

A trader at the Commercial Bank of Africa forecast the shilling would tend to ease in coming days and trade in a range between 87.80 and 88.30 against the dollar.