Shilling weakens on dollar demand, travel warnings

Kenya: The shilling weakened yesterday as banks bought dollars, while traders said the currency would remain under pressure due to new travel warnings that could hurt the ailing tourism sector.

Commercial banks quoted the shilling at 92.30/40 to the dollar against Friday's close of 92.15/25. One trader at a Nairobi-based commercial bank said the shilling lost ground at the start of the trading session as banks bought dollars on the interbank market, to cover their short positions.

Traders have said some banks had taken short dollar positions to meet demand for shillings by the offshore investors seeking a government bond last week, but were now seeking dollars. Joshua Anene, a trader at Commercial Bank of Africa, said the shilling is likely to remain under pressure as travel warnings issued by Western countries further dent the tourism industry and put pressure on dollar inflows.

 "Those travel warnings - they are quite effective in keeping visitors away," said Anene, who added that the shilling is expected to trade between 92.25 and 92.75 during the week.