NAIROBI: Kenya's shilling weakened to a new three-year low on Monday, hurt by dollar demand from the energy sector and panic buying as the local currency breached the psychologically important 92 level.
At 0715 GMT, the shilling fell to 92.25/35 against the dollar, its lowest level since Nov. 2011, having closed at 91.75/85 on Friday. Traders said the central bank may intervene to support the local currency by selling dollars. The central bank has in the past intervened when the shilling weakened near the 92 level.
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 before panic buying set in.
"We attribute (the sharp weakening) to some panic buying," said the trader, who added that the central bank was calling currency dealers to inquire about how the shilling is trading, showing that they may intervene to support the shilling.
"If its driven by fundamentals, they might leave it a day or two (before intervening)," added a trader at another commercial bank.
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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