Kenyan shilling steady, inflows offer support

Kenya: The shilling was steady against the dollar yesterday and traders said inflows of the US currency from tea export and non-governmental organisations (NGOs) had been matched by dollar demand from importers.

At the opening of trade, commercial banks quoted the shilling at 91.35/45 to the dollar, unchanged from Tuesday's close.

"It seems demand and supply is being matched. There's end-month demand from corporate clients, but it seems tea and NGOs sold a bit," John Muli, a trader at African Banking Corporation, said. Typically, dollar demand would be from sectors like energy, manufacturing and telecommunications.

The mop-up of liquidity in the money market throughout this week by the Central Bank has also supported the shilling. By absorbing excess liquidity, the bank makes it costlier to hold dollars, which in turn lends support to the shilling.

Traders said the market had already factored in a hold in the Central Bank's key lending rate at 8.50 per cent when its Monetary Policy Committee meets today.

Traders said they expect the shilling to trade between 91.20 and 91.85 to the dollar in the coming days. The currency firmed last week, buoyed by a drop in importer demand for dollars and hard currency inflows. "There is some pressure on the shilling because of the end-month dollar demand," a trader at one commercial bank said.

The Central Bank said yesterday it was in the money market to mop up Sh5 billion in excess liquidity using term auction deposits.