NAIROBI: The Kenyan shilling was steady on Wednesday but it could face pressure if data later in the day confirms expectations that inflation is easing, raising the chance of a rate cut next week.
At 0744 GMT, commercial banks quoted the shilling at 85.15/25 versus the dollar, barely changed from Tuesday's close of 85.10/30.
A Reuters poll of 11 analysts showed that year-on-year inflation could fall to 4.88 percent in October from 5.32 percent in September.
The October data is due some time on Wednesday.
"The shilling might not move much until inflation numbers come out and we see what the MPC will do," said a trader at a commercial bank.
Typically, lower inflation would give policymakers room to cut interest rates further, making it cheaper for importers to access credit and commercial banks to hold long dollar positions, which would weigh on the shilling.
The monetary policy committee (MPC) meeting is scheduled for Nov. 7.
"The market is more keen on the interest rate at the MPC meeting. Inflation would be a strong indicator on what they will do," said Robert Gatobu, a trader at Bank of Africa.
"But if the central bank continues mopping (up liquidity) the shilling might gain a bit to its 85.00 resistance."
Inflation in the east African nation soared last year to peak at nearly 20 percent in November, due to a rising fuel import bill and drought, which pushed the shilling to a series of record lows.
A tight monetary policy adopted by policymakers in the fourth quarter of 2011 has helped bring down inflation for 10 straight months and stabilise the exchange rate this year.
Policymakers, however, embarked on an easing cycle in July, slashing the benchmark central bank rate by 500 basis points in total at two meetings, to 13 percent, to support economic growth.
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