NAIROBI: The Kenyan shilling weakened on Tuesday, pressured by demand for dollars from importers amid scant hard currency inflows.
At close of trade at 1300 GMT, commercial banks quoted the shilling at 89.00/10 to the dollar, compared with Monday's close of 88.90/89.00.
Late in the session, the shilling touched 89.05/25, its weakest since mid-December 2011 when it hit 89.10/20, according to Thomson Reuters data.
Traders said there was little dollar inflow from the tea and tourism sectors, which are leading foreign exchange earners, to meet increased demand from importers.
"I think it is just adjusting slowly upwards. It seems there's some (dollar) demand," John Muli, trader at African Banking Corporation, said.
The market was also awash with the local currency due to renewed government spending and maturing bonds, traders said.
During the session, the central bank mopped up 3.4 billion shillings from the money market using repurchase agreements. It had sought to absorb 10 billion shillings in excess liquidity.
Nahashon Mungai, trader at Kenya Commercial Bank, said fundamentals showed there was more demand than supply of dollars and the only relief would come if the central bank sold the US currency.
Some other traders said this action would only serve to deplete the bank's own foreign exchange reserves, arguing that it was difficult to successfully reverse the tide against market fundamentals.
In late August, the central bank sold dollars into the market after the shilling hit 88.80/90, which at the time was its lowest level since December 2011.
Traders said they expected the shilling, which has lost about 2.6 percent against the dollar this year, would trade in the 88.60 to 89.10 range this week.
On the Nairobi Securities Exchange, the main NSE-20 share index was up 34.27 points to close at 5,217.25 points.
Equity Bank, which is setting up a mobile virtual network operator to expand in the fast-growing cellphone-based financial services market, rose 0.9 percent.
On the secondary debt market, government bonds valued at 674.2 million shillings were traded, up from 350 million shillings on Monday.
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