NAIROBI, Feb 20 (Reuters) – The Kenyan shilling could weaken in coming days, pressured by importers buying greenbacks to meet their end-month needs, traders said on Monday as the currency held steady in thin trade.
A currency dealer counts Kenya shillings at a money exchange counter in Nairobi October 23, 2008. REUTERS/Antony Njuguna
The shilling has firmed 2.4 percent this year helped by open market operations by the central bank which have mopped out 40.33 billion shillings ($485.61 million), and offshore dollar inflows drawn by high domestic interest rates.
At 0743 GMT, commercial banks quoted the shilling at 83.00/89.20 against the dollar, barely changed from Friday’s close of 82.90/89.10.
“The current lull in the market is expected to persist with demand and supply matching out,” said Bank of Africa in a daily report.
“We predict a slightly weaker shilling as we head into the week that precedes the end of the month with importer appetite expected to rise slightly.”
Traders said the shilling was likely to trade in the 82.50-83.50 range during the Monday’s session.
They said importer demand for the U.S. currency had subsided this year due to the impact of a rise in domestic interest rates to 18 percent in the final quarter of last year. That has prevented firms from taking more credit to fund purchases of goods for which they then have to pay in dollars.
The central bank has left the key rate unchanged in its two policy meetings this year as the shilling recovered some ground and inflation eased.
Inflation slowed in January for the second month in a row to 19.31 percent, while the shilling came off a record low of 107 per dollar hit in October.
“We have not seen much corporate demand for the dollar since the cost of accessing credit is still high out there,” said Dickson Magecha, a trader at Standard Chartered Bank.
(Reporting by Kevin Mwanza; Editing by George Obulutsa)
