Shilling weakens on election concerns

Bonfires lit o the road during protest over party ominations in Homabay County [Photo:Standard]

 

NAIROBI,KENYA: Kenya's shilling weakened for a fourth straight session on Tuesday, pressured lower by importers stocking up dollars ahead of the March presidential election and banks covering positions after the currency fell through a key support level.

Traders said last week's violence during political primary nominations left importers concerned about the coming elections, the first since the 2007 poll when widespread ethnic violence caused massive disruption to Kenya and neighbouring economies.

At 0715 GMT, commercial banks quoted the shilling at 87.15/25 to the dollar, 0.2 percent weaker than the 86.90/87.10 it closed at on Monday.

Traders said it was significant the shilling weakened below the 87 resistance level.

 "There is some dollar demand, especially from the energy side and banks covering positions. They were expecting the Central Bank would support the shilling to remain below 87.00," said Julius Kiriinya, a trader at African Banking Corporation.

Technical charts showed the next shilling support level at 87.50 to the dollar, but traders said they expected the Central Bank of Kenya would come in to sell dollars and mop up liquidity to prop up the local currency.

The shilling has lost 1.2 percent against the dollar this year, causing the central bank to intervene to support the currency through sale of dollars and soaking up of excess liquidity.

"The shilling still looks vulnerable and will to a certain degree look up to the Central Bank for support in the lead up to the general elections," said Bank of Africa in a daily report.

-Reuters