Money Markets
By Reuters
In Summary
- Traders said persistent demand for dollars from corporate clients paying dividends to foreign shareholders and making routine month-end payments were weighing on the shilling.
Kenya's shilling tested the psychologically
important 88 per US dollar level in early Tuesday trading, turning
market attention to the central bank, which a day earlier said it was
ready to defend the under-pressure currency against volatility.
Traders said persistent demand for dollars from
corporate clients paying dividends to foreign shareholders and making
routine month-end payments were weighing on the shilling. On top of
that, a recent spate of bombings in the country has shaken confidence in
the local currency.
A convincing breach of the 88 level would likely
herald further weakening, said Duncan Kinuthia, head of trading at
Commercial Bank of Africa.
The Central Bank of Kenya signalled its intent to
stem the shilling's steady weakening by selling dollars on Friday and
then saying it had sufficient foreign reserves to cushion the currency
against shocks.
"They may come in and come in aggressively if they
see further weakness," Mr Kinuthia said. "I expect them to be concerned
if they see us approaching the 88.50 level."
At 0730 GMT, commercial banks priced the shilling at 87.85/88.05, barely moved from Monday's close.
The central bank's governor, Njuguna Ndung'u,
blamed seasonal factors including the foreign dividend payments for
volatility in the currency market over the past two weeks. He did not
mention the security challenges facing the country
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