Kenyan shilling firms ahead of Tuesday's benchmark rate meeting

Kenya's shilling firmed on Tuesday ahead of a central bank Monetary Policy Committee (MPC) meeting later in the day, where policymakers are expected to hike the benchmark lending rate to support the local currency.

At 0714 GMT, the shilling was trading at 97.25/45 to the dollar, compared with 97.70/90 at Monday's close. The local currency has lost 7.6 percent to the dollar so far this year.

A trader at a Nairobi-based commercial bank said the shilling weakened to 98 in early trade before firming due to weak dollar demand and fears the central bank will buy dollars to intervene, as it has done several times in past few months.

"At this levels no one is looking to buy (dollars), the shilling has retreated (strengthened)," said the trader. The central bank is expected to raise rates for the first time in two years. A Reuters poll of analysts showed most expect rates to be hiked by 100 basis points.

"That has been priced in, so anything above (100 basis points) will probably be a shock to the market," added the trader.

The shilling has been under pressure from the global strength of the dollar, a growing current account deficit and sliding foreign exchange earnings from tourism as visitors have stayed away due to a series of attacks by Somali Islamists.