NAIROBI: The Kenyan shilling weakened to a new three-year low on Friday, hurt by worries over the country's ailing tourism sector and traders said they expect the central bank to intervene and prop up the shilling.
At 0745 GMT, commercial banks posted the shilling at 89.80/90.00 to the dollar, weaker on Thursday's close of 89.70/80, its weakest level since December 2011.
Traders said they expect the central bank to defend the shilling, following comments made by the bank on Tuesday that it had adequate hard currency reserves to cushion the foreign exchange market against any shocks.
"The shilling is on the back foot... we'd expect (the central bank) to do something at these levels," said Nahashon Mungai, a trader at KCB.
Mungai said the sell-off in Nigerian stocks and currency, could spill over into the Kenyan market.
"Then of course the feeling is that what we are seeing in Nigeria, (offshore investors) are leaving Nigerian markets and there is a fear there could be a contagion effect on Kenya," Mugnai said.
The naira has come under pressure in the past two months from falling global oil prices LCOc1, dampening the appetite for assets in Africa's biggest economy and chief oil exporter.
The shilling has weakened about 4.2 percent against the dollar this year.
The local currency has been on the back foot most of this week, losing about 0.5 percent against the dollar after weekend attacks along its Indian Ocean coastline reignited fears that the tourism industry will continue to suffer.
Previous attacks by militants in the region that is a major tourist hub have scared away visitors and prompted Western nations to issue travel advisories. This has led to a drop in tourist arrivals this year, hurting Kenya's tourism sector, a key earner of hard currency.
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