Kenyan shilling eases against dollar, central bank action eyed

NAIROBI, KENYA: The Kenyan shilling weakened on Tuesday, hurt by dollar demand from the oil and telecommunication sectors, as traders watched to see if the central bank would intervene to stop the currency's depreciation.

At 0730 GMT, commercial banks quoted the shilling at 88.25/88.35 to the dollar, slightly down from Monday's close of 88.20/30.

The shilling, down about 2.3 percent against the dollar this year, has been weakening over the past few weeks, even though liquidity has tightened. Traders are now looking to see whether the central bank will intervene to prop up the local currency.

"The last time we traded at 82.25/35 levels, the central bank came in and intervened. So the question is will they intervene considering the slow pace of depreciation," said one trader a commercial bank in Nairobi.

He said oil and telecommunications companies were adjusting to a weaker shilling and coming in to buy dollars instead of waiting to see if the local currency would firm.

The weighted average lending rate on the interbank market rose to 12.1919 percent on Monday from about 7.5 percent in mid-July. Traders forecast the shilling was likely to reach 88.50 once the liquidity crunch eased.