28 June 2012

Kenya: Shilling Firms Up Against Dollar but Likely to Drop

The Kenya shilling inched up yesterday, supported by buying by exporters in the agricultural sector, but the currency could dip in coming days as demand for dollars from energy sector importers picks up, traders said. At 0742 GMT, commercial banks posted the shilling at 84.10/25 to the dollar, compared with Tuesday's close of 84.15/35.

Traders said increased shilling liquidity in the market would also weigh on the local currency. "Last week the market was very tight and that helped the shilling. This week we are seeing improved liquidity," Chris Muiga, senior trader at Kenya Commercial Bank, said. "Also, it's the end of the month, so we see quite a bit of demand from the energy sector especially. So we could see some rally in the dollar based on that."

Traders will also be on the lookout for possible action by the Central Bank in support of the shilling via repurchase agreements, having been absent from the market since June 19. Traders said they expected the shilling to trade in the 83.75-84.50 range in coming days.

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