NAIROBI: The Kenyan shilling fell against the dollar for a third session on Tuesday weighed down by energy sector demand for dollars and negative global sentiment toward riskier assets.
Traders said the market was expecting the central bank to raise interest rates for a second time in four weeks at a meeting on Wednesday. That could offer some reprieve to the shilling, whose 25 percent slide makes it one of the worst performing emerging currencies this year, hit by concerns over inflation and the bank's policy mix.
At 0636 GMT, commercial banks quoted the shilling at 102.00/50 against the dollar, 0.8 percent weaker than Monday's close of 101.20/40.
"The energy guys are in the market buying dollars, while the dollar has gained considerably overnight due to risk aversion from the euro crisis," said a trader with one commercial bank.
"I don't expect it to fall further because of the MPC tomorrow. Guys are watching out for the decision."
All 12 analysts polled by Reuters expect the central bank to raise rates from the current 7 percent, with the median forecast at 7.63 percent.
Traders said the market is awaiting the recommendations of a high-level committee set up by the prime minister's office to look into ways of stemming the shilling's decline.
"We are waiting to see what they come up with. Markets are crazy because of the euro. That's why were are seeing wide spreads," said Sameer Lagadia, head of trading at Diamond Trust Bank.
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