NAIROBI: The Kenyan shilling touched a 32-month low on Monday, under pressure from dollar buying by importers and lower hard currency inflows.
At the close of trade, commercial banks quoted the shilling at 88.90/89.00 to the dollar, compared with Friday's close of 88.80/88.90. The shilling had fallen to an intra-day low of 88.95/89.05 last seen in January 2012, Reuters data showed.
"The shilling lost on intensified dollar buying by mostly telecommunications and manufacturing firms, and attempted to breach the 89 mark to the dollar," said peter Njuguna, an official at Kenya Commercial bank's treasury division.
"However, the decline attracted (dollar) sellers at around the 89-level and the shilling recouped from a low of 88.95/89.05."
Traders said the shilling's fortunes would depend on whether there would be sustained dollar buying or an intervention by the central bank, to sell dollars into the market.
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.
The central bank has regularly soaked up excess liquidity since last year. On Monday the bank drained excess liquidity for the eighth trading session in a row. The action supports the shilling by making it more costly to hold dollars.
But traders said the mopping up action by the central bank was unlikely to prevent the shilling falling further and some said the central bank may resort to selling dollars to prop up the shilling.
Other traders said the bank would only sell dollars if the shilling's fall was caused by speculative trade rather than fundamentals, arguing that the local currency was on the back foot owing to low dollar inflows against rising dollar buying.
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 so far 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 13.48 points, or 0.26 percent, to close at 5,182.98 points.
On the secondary market, government bonds valued at 350 million shillings ($3.94 million) were traded, down from 899.6 million shillings traded on Friday.
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