NAIROBI: The Kenyan shilling weakened against the dollar on Tuesday and market participants said they expected it to trade in a narrow band.
At the 1300 GMT close of trade, commercial banks posted the shilling at 87.70/80 per dollar, slightly weaker than Monday's close of 87.55/65, but still within its recent range.
The central bank would seek to support it at 88.20, to prevent it from falling too steeply, thereby confining it into a tight range, traders said.
The central bank insists it has no particular level it prefers for the shilling, but it has acted aggressively to stop it from falling beyond that point in recent weeks.
"Going forward we will probably trade in a very narrow range because 88.20 will be a hard nut to crack due to the central bank's intervention and there is demand (for dollars) at around 87.50," said Chris Muiga, a trader at National Bank.
The central bank has regularly intervened to mop up shilling liquidity via repurchase agreements and other instruments, and in recent weeks traders said it had also sold dollars.
On Tuesday, the bank mopped up 11 billion shillings using repos. It received bids worth 32.1 billion shillings.
Traders are also waiting for the budget, due to be presented to parliament on Thursday, for the latest guidance on the economy's direction.
On the stock market, the benchmark NSE-20 share index inched down by 0.15 percent to close at 4,828.65 points, falling for the second straight day.
Shares of Centum Investment dropped 2.5 percent to close at 39.25 shillings, after the company said it would not pay a dividend for another five years.
"Some people might have expected a resumption of the dividend which didn't happen, but overall it was a good performance," said Eric Musau, an analyst at Standard Investment Bank.
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