18 April 2012

Kenya: Tighter Liquidity Seen Keeping Shilling Stable

The Kenya shilling was seen stable against the dollar yesteday, with traders saying tightened liquidity would drive up interbank rates, leaving little for the Central Bank to mop up through repurchase agreements.

At 0720 GMT commercial banks posted the shilling at 83.10/30 per dollar, barely changed from Tuesday's close.

The Central Bank has been in the market soaking up excess shilling liquidity in the last two weeks, totalling 31.65

billion shillings ($380.64 million), to help stabilise the average interbank rate after it fell to 10.2 per cent on April 5.

The interbank rate has since risen, climbing to 16.4 percent

on Tuesday from a day earlier.

Traders said they expected the rate to reach the Central Bank's benchmark rate of 18 percent soon on tightening liquidity

as companies settle their monthly value added tax payments.

"The shilling is range bound. The central bank may stay out of the market due to the tightening liquidity," said Duncan

Kinuthia, head of trading at Commercial Bank of Africa.

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