NAIROBI, Jan 27 (Reuters) – The Kenyan shilling slipped against the dollar on Friday as importers snapped up dollars to meet their end-month obligations, but traders said they expected the shilling to firm in coming days aided by tight liquidity in the market.
Resigned Finance minister Uhuru Kenyatta
The market shrugged off the resignation of Finance Minister Uhuru Kenyatta late on Thursday following his indictment earlier this week for crimes against humanity by the International Criminal Court (ICC), traders said.
At 0730 GMT, leading commercial banks quoted the shilling at 85.20/40 against the dollar, weaker than Thursday’s close of 84.80/85.00.
“We’ve seen some demand for dollars from clients meeting their end-month demand,” said Bhavin Chandaria, a trader at Imperial Bank.
“There was no change after the finance minister resigned because the market had already factored it in. At the moment liquidity is tight and we might see the shilling firm towards 84.”
Traders said they expected the shilling to trade in the 84.50-85.50 range during Friday’s session.
The shilling has been steady this year aided by the central bank’s consistent mopping up liquidity through repurchase agreements and injecting dollars to commercial banks to prevent a repeat of last year’s scenario where it was widely blamed for letting the shilling collapse.
Traders said they expected the central bank to hold its key lending rate at 18 percent at a rate setting meeting on Wednesday, as it did at its previous meeting after an aggressive series of rate increases late last year.
The weighted average interbank lending rate rose to 22.4 percent on Thursday, from 21.1 percent the previous day as banks competed for the few shillings in the market.
“Tight liquidity has killed dollar demand and that will help the shilling gain some ground next,” said a trader at a commercial bank.
Reporting by Kevin Mwanza, Reuters