NAIROBI: The Kenyan shilling weakened on Tuesday as importers sought dollars to pay their bills, but traders said tight liquidity was limiting the local currency's losses before a central bank decision on lending rates.
At the 1330 GMT close of trade, commercial banks quoted the shilling at 105.70/70 to the dollar, down from Monday's close of 105.30/40.
"There's slight (dollar) demand in the market, though the tight liquidity is slowing down the process of weakening," a senior trader at one commercial bank said.
The weighted average interbank lending rate rose to 25.2328 percent on Monday from 24.5569 percent on Friday indicating there was a severe shortage of liquidity in the domestic money markets.
The market closed before a central bank's Monetary Policy Committee meeting on Tuesday announced its decision.
Thirteen of 15 analysts polled by Reuters forecast that the bank will keep its benchmark lending rate at 11.50 percent.
In the stock market, the benchmark NSE-20 share index lost 30.14 points, or 0.71 percent, to close at 4,212.11 points.
Like other frontier stocks, Kenyan shares have been under pressure this year due to investor flight into less risky assets, ahead of tightening by the US Federal Reserve.
In the debt market, bonds worth 74 million shillings were traded, down from Monday's volume of 246 million shillings.
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