NAIROBI: The Kenyan shilling lost ground again on Tuesday, with end-month dollar demand pushing the currency to multi-year lows and stoking expectations that the central bank will intervene to support the shilling.
At 0740 GMT, commercial banks posted the shilling at 88.75/85 per dollar, compared to Monday's close of 88.65/75, the currency's lowest level since December 2011.
The shilling, which has lost about 3 percent against the dollar this year, has been weakening in the past few weeks as dollar inflows have dwindled, partly as a result of falling business in the country's key tourism industry which is reeling after a string of attacks by Islamist militants.
Commercial Bank of Africa trader Joshua Anene said the shilling has come under pressure again due to concerns about the country's hard currency receipts from tourism.
The situation was compounded by the traditional end-month dollar demand by companies seeking to pay import bills.
"At the levels we have reached now, it's only a question of 'when' and not 'if' the central bank comes in (to intervene)," Anene said.
The central bank has in the past supported the shilling by mopping up excess liquidity in the market. However, with liquidity already extremely tight and money market rates hitting 13.8391 percent on Monday from about 7.5 percent in mid-July, Anene expects the central bank to intervene by selling dollars.
Traders said the shilling could head to the 89.00 per dollar level if it convincingly breaks past 88.80 in the next few days.
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