Shilling steady as Central Bank of Kenya mops up Sh11 billion

Kenya: The shilling was steady early yesterday, with investors and companies holding back on dollar purchases and keeping the currency below levels the Central Bank of Kenya set after intervening last week to sell dollars.

The shilling was trading at 90.05-90.15 to the US currency, little changed from Tuesday’s close of 90.10-90.20, which was driven by demand for dollars from importers and manufacturers.

“We have seen buyers stay on the sidelines at levels above 90,” said Duncan Kinuthia, the head of trading at Commercial Bank of Africa.

“There is fear the Central Bank could come in again as they don’t seem to like these levels very much.”

Traders said the Central Bank intervened with dollar sales on Friday at around 90.30, a three-year low. The move helped strengthen the shilling to below the 90 mark, but it has weakened again since then.

The Central Bank does not tend to comment on any intervention but has previously said it had enough reserves to support the foreign exchange market in case of shocks.

Traders have suggested the currency was likely to hover in the 89.80 to 90.30 range for the next few days, with companies expected to meet their need for dollars by ordering on dips.

One trader at a commercial bank said he expected 90.50 to hold as a resistance level, particularly as demand for dollars usually slowed towards the end of the year.

Tourist arrivals

“Customers maybe would prefer to wait and see whether the central bank will do anything. So it is an issue of who will be the first one to pull the trigger,” the trader said.

CBK added it would seek to mop up Sh11 billion in excess liquidity from the money market, using repurchase agreements (repos) and term auction deposits.

Mopping up liquidity tends to make it more costly to hold dollars, which helps support the shilling.

The shilling has weakened this year, in part because a drop in tourist arrivals has starved the market of a major source of dollars.