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Dollar demand takes toll on Kenyan shilling

   
  

Added At:  2012-07-31 2:54 PM

   Last Updated At: 2012-07-31 2:54 PM

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REUTERS

During Monday's session‚ the central bank mopped up 9 billion shillings in excess liquidity through repos.

NAIROBI: The Kenyan shilling weakened on Tuesday, weighed down by demand for dollars from importers to meet their end of month obligations as well as a surge in shilling liquidity.

At 0704 GMT, commercial banks posted the shilling at 84.20/40 per dollar, weaker than Monday's close of 84.10/30, but still trading within its recent range of 84.00-84.50.

"There is still some end-month corporate (dollar) demand in the market that's weighing on the shilling," said Dickson Magecha, a trader at Standard Chartered Bank.

Traders said increased liquidity in the market, due to redemption of maturing government debt, could pose a downside risk to the shilling, although the central bank could counter that by mopping up liquidity through repurchase agreements (repo).

The weighted average interbank rate dropped for a sixth straight session to 10.8 percent on Monday, from 11.2 percent on Friday.

During Monday's session, the central bank mopped up 9 billion shillings in excess liquidity through repos. It received bids worth 18.8 billion shillings for the 9 billion it had offered.

"From yesterday's results the market is still awash with shillings, but if the central bank continues mopping up, that might support the currency a bit," said Robert Gatobu, a trader at Bank of Africa.

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