Kenyan shilling inches down due to dollar demand

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.

Tuesday, July 31, 2012

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 counterthat 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 ($106.8 million) 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.