NAIROBI: The Kenyan shilling strengthened slightly against the dollar on Monday after the central bank mopped up liquidity, lifting the local currency from a three-year low.
At 1030 GMT, commercial banks posted the shilling at 89.75/85 to the dollar, a touch stronger on Friday's close of 89.85/95, which was its weakest level since December 2011.
The central bank on Monday sought to mop up 20 billion shillings ($222.97 million) in excess liquidity, using repurchase agreements (repo) and term auction deposits.
"This mopping up... has propped up the shilling slightly," said Eric Gathecha, a trader at I&M Bank.
The shilling has weakened about 4.1 percent against the dollar this year, mainly due to a slump in hard currency inflows from tourism following Islamist attacks this year. Inflows of dollars from tea exports have also dwindled owing to weaker prices caused by a global glut of the commodity.
The central bank has regularly drained excess liquidity from the money markets in recent months. Removing excess liquidity makes it relatively costlier to hold onto long dollar positions, which in turn helps strengthen the shilling.
Last month the central bank also supported the currency by selling dollars when the shilling reached the 89.50 mark. Most traders expect the bank to do the same if she shilling breaks past the 90 level against the dollar.
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