NAIROBI: The Kenyan shilling eased slightly against the dollar in early trade on Monday, with traders expecting the central bank to sell dollars to prop up the currency if it weakens further.
At 0850 GMT, commercial banks posted the shilling at 90.30/40 amid thin volumes, weaker than Friday's close of 90.25/35 to the dollar.
"It's been quiet. But if the shilling goes up to 90.50, we expect the central bank to come in and intervene," said John Njenga, a trader at Commercial Bank of Africa.
The local currency has weakened 4.8 percent against the dollar this year despite frequent interventions by the central bank to prop up the shilling, including dollar sales.
Kenya's central bank said it was in the money market on Monday to mop up 7 billion shillings ($77.52 million) in excess liquidity using repurchase agreements and term auction deposits. By absorbing excess liquidity, the bank makes it more expensive to hold long dollar positions, which supports the shilling.
Traders said the bank sold dollars last Wednesday to defend the local currency when the shilling neared the 90.50 level.
Njenga said the shilling may receive some support this week from companies which are closing down ahead of the Christmas holidays or paying pre-Christmas bonuses to employees.
"They will be paying in the middle of the month, so we expect them to convert (dollars into shillings) which may offer support to the shilling," he said.
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