NAIROBI: The Kenyan shilling was stable against the dollar on Wednesday and traders said expectations of rising yields on government securities would help support the local currency.
The central bank of Kenya is due to sell 10 billion shillings' ($117.65 million) worth of 182-day and 364-day Treasury bills during the session.
At 0730 GMT, commercial banks posted the shilling at 84.80/85.00, unchanged from Tuesday's close.
"Yields are ticking higher and if we see this trend continue, it is supportive of the shilling," said Dickson Magecha, a trader at Standard Chartered.
The weighted average yield on the benchmark 91-day Treasury bill rose to 8.093 percent at the auction last week, from 7.647 percent previously.
Traders said the rising interest rates were attractive to investors, who had shunned the debt market after yields tanked to 7.5 percent in September. Yields on the short term debt turned upwards two weeks ago.
Typically high yields in the debt market helps tighten shilling liquidity, making it costly to fund long dollar positions, Robert Gatobu, a trader at Bank of Africa said.
It also increases offshore investor demand into the local debt market, increasing dollar supply into Kenya.
"Being the first week of the month, there is also muted (dollar) demand, so there is nothing to put pressure on the shilling at the moment," he added.
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