NAIROBI: The Kenyan shilling held steady against the dollar on Friday, underpinned by a liquidity squeeze, traders said.
By 0726 GMT, commercial banks quoted the shilling at 87.35/55 per dollar, a level it has hovered around all this week.
"Being the beginning of the month importers' appetite for dollars is a bit down," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
"The overnight (lending rate) has ticked up, but we expect as the government continues spending, then we could see liquidity come into the market."
Demand for the US currency normally peaks at the end of the month as importers, especially from the energy sector, rush to make payments for their supplies.
The weighted average interbank lending rate edged up to 9.5374 percent on Thursday, from 9.3777 percent in the previous session. The rate has risen for 10 straight sessions from 6.6810 percent on July 17.
The government plans to release up to 24 billion shillings ($275 million) in development funds for its 290 constituencies this month, which will boost liquidity in the market.
The shilling has weakened 1.4 percent since the start of 2013 due to increased demand for imports after a March election passed peacefully and lifted business and consumer confidence, in contrast to five years ago when post-election chaos hurt the economy.
The currency was also weighed down in July by a fall in tea exports to Egypt, the biggest buyer of Kenyan tea, following civil unrest in the north African country. Tea is Kenya's top hard currency earner.
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