NAIROBI: Kenya's shilling was little changed on Wednesday, with dollar demand in the interbank market offset by central bank liquidity mop ups and hard currency inflows from investors preparing to buy a bond.
By 0920 GMT, commercial banks quoted the shilling at 92.35/55 to the dollar, barely changed from Monday's close of 92.35/45.
Sheikh Mehran, head of trading at I&M Bank, said there was early dollar demand by banks in the interbank market but the volumes were thin.
"The market is in a holiday mood at the moment, so there is not much happening," said Mehran, who added that an upcoming infrastructure bond should lend support to the shilling.
Kenya's central bank has invited bids for a 12-year infrastructure bond worth up to 25 billion shillings ($271 million) in a tap sale.
Traders said the bank should also receive support from central bank liquidity mop ups, which makes it more expensive to hold dollars. The bank said on Wednesday it planned to mop up 12 billion shillings in excess liquidity from the money markets using repurchase agreements and term auction deposits.
Joshua Anene, a trader at Commercial Bank of Africa, said the shilling was likely to remain under pressure in coming weeks as dollar demand continues to outweigh hard currency inflows.
Anene also said last week's comments by the International Monetary Fund, suggesting the shilling is over-valued by up to 10 percent, means the shilling is likely to test the 93 level against the dollar in coming weeks.
"It's a pointer to the market that the shilling should move higher (weaken)," said Anene.
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