NAIROBI: Kenya's shilling firmed on Wednesday, with traders expecting more gains, helped by offshore investor flows to buy government bonds later in the day and subdued dollar demand as companies close down for the holidays.
At 0857 GMT, commercial banks quoted the shilling at 90.40/60 to the dollar, compared with Tuesday's close of 90.55/65.
The central bank is due to auction a new two-year Treasury bond and a re-opened 15-year bond worth a total 20 billion shillings later on Wednesday.
Traders said this was expected to give the shilling some support as foreign investors bring in dollars to buy the bonds.
"It looks bullish today," Peter Njuguna, head of asset liability management at Kenya Commercial Bank, said.
"You know there is a bond auction today, so people are arguing that we could see just a bit of inflows going into the bonds and supporting the shilling," he said.
Traders said a slowdown in dollar demand due to companies closing down for the Christmas and New Year holidays will also help strengthen the shilling.
"The shilling has slightly appreciated, on subdued (dollar) demand. As we head into the festive season, we should see the shilling get some support as companies close for the season," said Eric Gathecha, a trader at I&M Bank.
The central bank said it planned to mop up 4 billion shillings in excess liquidity during the session. Absorbing excess liquidity makes it relatively more expensive to hold long dollar positions, which lends support to the shilling.
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