NAIROBI: The Kenyan shilling held steady on Wednesday but traders said it was likely to weaken due to importer demand for dollars amid a wide current account deficit.
At 0800 GMT, leading commercial banks posted the shilling at 85.90/86.00 per dollar, unchanged from the previous day's close. But they said the shilling could come under pressure.
"We could take out 86.00 and head to 86.50 against the dollar," said Christopher Muiga, a senior trader at Kenya Commercial Bank.
"Demand will definitely outweigh supply and the current account deficit keeps growing and this will definitely lead to a weaker currency."
In the absence of other fundamentals like economic data, the Kenyan foreign exchange market trades on flows, mainly supply of dollars from the tourism sector, remittances from Kenyans living abroad and earnings from agricultural exports, as well as demand from energy sector firms and other importers.
The current account deficit stood at just over 11 percent of the Gross Domestic Product in May, viewed as high by policymakers and creating potential pressure on the exchange rate.
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