NAIROBI: The Kenyan shilling edged down on Friday, weighed by demand for dollars from banks replenishing their dollar positions as a domestic funding crunch eases.
At 0800 GMT, commercial banks posted the shilling at 87.95/88.05, down from Thursday's close of 87.85/95.
"As money markets loosen up, people are squeezing out dollar shorts," said a trader with a leading commercial bank.
Banks had sold off their dollars to fund their shilling positions in the last few sessions after short-term lending rates jumped.
Overnight borrowing rates on the interbank market shot up over the last two weeks after the government delayed the release of funds to departments and local authorities. The central bank has been injecting funds into the market through reverse repos since Tuesday, helping to alleviate the crunch. .
The overnight rate crept up again to 11.7266 percent on Thursday.
But volumes dropped to just over 7 billion shillings, suggesting the reverse repos were having an effect and, with 15 billion shillings of government securities also due to mature on Monday, interbank rates were on track to fall.
Market participants said the shilling was likely to remain under pressure although the central bank could sell dollars to prevent it from slipping through 88.00.
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