Kenyan shilling holds steady as Central Bank action eyed

The shilling was little changed yesterday in a cautious market as traders anticipated possible Central Bank action to prevent the currency from sliding 100 to the dollar. In early trade, commercial banks posted the shilling at 99.55/65, its lowest point since October 2011, barely changed from the previous day’s close of 99.50/60.

“The market is waiting to see if the Central Bank will intervene,” said a trader with a commercial bank. Traders said the Central Bank, which pumps dollars into the market whenever the shilling depreciates too rapidly, would not want the shilling to drop to 100.

It has fallen in recent days due to end-month demand for dollars, improved liquidity in the money markets, which usually makes it cheaper to bet against the local currency, and persistent worries over a gaping current account deficit. The deficit worsened to Sh101.5 billion in the first quarter of 2015 versus Sh63.8 billion a year earlier.