NAIROBI: The Kenyan shilling held steady against the dollar on Friday, but the local currency was expected to strengthen on greater inflows from the agricultural sector and frequent central bank interventions to tighten liquidity.
At 0805 GMT, commercial banks quoted the shilling at 84.00/20 per dollar, the same level it closed on Thursday.
"Inflows from the agriculture sector are still in the market and the central bank is also in mopping. That could support the shilling," said John Muli, a trader at African Banking corporation.
The central bank has increased its liquidity absorbing operations this week through repurchase agreements (repos) to support the shilling, which is 1.4 percent firmer this year.
The central bank has intervened in the market every day this week. On Friday it sought to soak up 7 billion shillings ($83 million) via repos.
Traders said they expect the shilling to trade in the 83.60-84.20 range next week, but falling money market interest rates were seen adding pressure to the shilling as they made it easier for commercial banks to hold long dollar positions.
The weighted average interbank interest rate slipped to 7.8 percent on Thursday from 8.0 percent on Wednesday, extending the rate's tumble from 14.1 percent in late July.
"Excess liquidity on the local currency is seen finally catching up with the shilling, though the monetary authorities have stepped up efforts to mop up the glut through the repo market," said Commercial Bank of Africa in a daily note to clients.
The market will be closed on Monday for Eid's bank holiday celebrations.
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