NAIROBI: The Kenyan shilling dipped on Tuesday as some banks took advantage of gains in the previous sessions to buy dollars, but traders expected tight money market liquidity to prop up the local currency.
Commercial banks quoted the shilling at 84.90/85.00 per dollar by 0738 GMT, slightly weaker than Monday's close of 84.70/90.
Traders said there was a slight shortage of shillings because companies have been paying taxes and investors have sought the local currency to buy a 12-year infrastructure bond.
"Some interbank bank players are picking dollars after yesterday's gains. But liquidity is still tight so the shilling may not slide much," said a trader at one commercial bank.
A shortage of funds in the local money markets has helped the shilling firm to a near four-month high of 84.50.
Overnight borrowing rates have been rising steadily for more than two weeks, sending the interbank weighted average interest rate to 10.8390 percent on Monday from 10.4028 percent on Friday.
John Muli, a trader at African Banking Corporation, said the local currency may benefit from tea exporters selling dollars after the auctions of the commodity on Monday and Tuesday.
Tea is the leading hard currency earner for the east African nation. It earned the country $1.2 billion in 2012.
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