NAIROBI: Kenya's central bank sold dollars to banks on Monday to prop up the shilling after the currency weakened to a new three-year low beyond a psychologically important level, hurt by demand for the greenback from the energy sector.
The shilling fell to an intraday low of 92.32/42 against the dollar, beyond the 92 level and its lowest point since Nov. 2011, having closed at 91.75/85 on Friday. The drop prompted the central bank to sell an unspecified amount of dollars, traders said, helping the shilling to cut some of its losses to trade at 92.05/15 in the afternoon.
A trader at one Nairobi-based commercial bank said dollar demand from the energy sector forced the shilling through the 92 level in early trade.
"We attribute (the sharp weakening) to some panic buying," said the trader, adding that the central bank was calling currency dealers to ask how the shilling was trading.
Other regional currencies have lost ground to the dollar in recent weeks due to the strength of the dollar, which has rallied against most major global currencies on expectation the US Federal Reserve would hike rates faster than expected.
Traders said the shilling was receiving some support from tighter money market liquidity, which usually helps the local currency.
Technical analysis of the 14-day and 50-day weighted moving averages shows the shilling was expected to maintain a weakening trend in the near term.
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