NAIROBI: The Kenyan shilling was steady against the dollar on Thursday and traders said they were on the look out for the central bank injecting more money into the market to ease tight liquidity that has led to rising interbank lending rates.
At 0635 GMT, commercial banks quoted the shilling at 87.80/88.00 to the dollar, compared with Wednesday's close of 87.85/95.
On the interbank market, the weighted average lending rate rose to 11.4557 percent on Wednesday from 10.7589 percent a day earlier, while volumes borrowed fell to 7.52 billion shillings from 15.48 billion shillings ($176.31 million) a day earlier.
"We are just watching for liquidity. It's been very tight. So the little (dollar) demand which is coming in is being squared by guys selling to fund their Kenya shilling (requirements)," John Muli, a trader at African Banking Corporation, said.
Traders said there was dollar demand from oil companies.
On Wednesday, the central bank said it planned to inject 13 billion shillings using reverse repurchase agreements. It received bids worth 30 billion shillings, and injected 15 billion shillings at a weighted average rate of 13.782 percent.
Traders have said the cash crunch in the money market was due to delays in the government disbursing funds to departments and local authorities.
"The money market is tight. For the last two days we have seen CBK coming in to inject cash, but what they are injecting is too small and the rates are too high," John Njenga, trader at Commercial Bank of Africa said.
Traders said if the central bank pumped in anything between 10 and 15 billion shillings, it would keep the shilling steady.
They forecast the currency to trade in the 87.50 to 88.00 range in coming days.
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