Kenyan shilling dips against dollar, seen weaker

NAIROBI: The Kenyan shilling dipped on Friday as importers bought dollars, a day after the government said a technical team would propose new measures to support the battered local currency early next week.

The Central Bank of Kenya (CBK) also said on Thursday it will hold its next Monetary Policy Committee meeting on Oct. 5, following a meeting earlier this month when it raised its benchmark rate by 75 basis points to 7 percent.

At 0657 GMT, commercial banks quoted the shilling at 99.80/100.00 against the dollar, weaker than Thursday's close of 99.50/80.

"There is a bit of dollar demand coming through from some sceptical importers who seem to think the CBK won't do much. Until we know what exactly the committee and task force comes up with, I think we are still on a back foot," said a trader with a commercial bank.

Traders said there was little to support the shilling at the moment, which has been hit by a rising inflation rate -- which hit 17.32 percent year on year in September -- rising interest rates and a growing trade deficit.

Ranked among the world's worst performing currencies this year, the shilling has lost more than 23 percent against the dollar so far in 2011, with a crisis of confidence in the central bank's ability to defend the currency also weighing.

"What is there to support the shilling? Inflation went up again, so have interest rates, and the trade deficit is at an all-time high. We can't trade on promises. We are still deep in the woods," said a second trader with another commercial bank.

Other traders said they expected the shilling to firm on government support, with importers withholding demand for dollars on hopes the shilling might strengthen next week.

"With the pronouncements from the CBK governor and the Prime Minister's office, sentiment favours a stronger shilling," said Bank of Africa in a daily report to clients.