NAIROBI: The Kenyan shilling fell to a fresh three-year low on Wednesday due to demand for dollars from importers, with traders expecting the local currency to continue losing ground unless the central bank intervenes.
At 0720 GMT, commercial banks posted the shilling at 90.55/65, weaker than Tuesday's close of 90.45/55 to the dollar. The currency is now at its lowest level since November 2011.
Joshua Anene, trader at Commercial Bank of Africa, said the central bank is expected to sell dollars during the day to prop up the shilling to prevent it from sliding further, or mop up excess liquidity resulting from maturing bonds.
"If the bank doesn't come (and sell dollars), we will break 91 level," said Anene. "What is supporting the shilling is the central bank. It looks fundamentally exposed."
He said hard currency inflows were scanty in the market.
A fall in tourist numbers following a spate of Islamist attacks and a decline in the price of tea, both key sources of hard currency inflows for east Africa's biggest economy, has put pressure on the shilling.
The local currency has lost about 4.9 percent against the dollar this year despite frequent interventions by the central bank to prop up the shilling, including dollar sales.
Traders said the bank sold dollars last Wednesday to support the shilling as it neared the 90.50 level, which the currency has broken through now.
The bank has also been regularly mopping up excess money market liquidity, which lends support to the local currency. The bank on Tuesday mopped up 5.5 billion shillings ($60.77 million) after seeking to mop up 10 billion shillings.
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