Kenyan shilling firms against the dollar on higher yields

Money Markets

Traders said there was also little demand for dollars. PHOTO | FILE 

By REUTERS

In Summary

• CBK also sought to mop up Sh20 billion from the market on Monday, saying there was excess liquidity.

The Kenyan shilling firmed against the dollar on Monday, benefiting from higher lending rates and exporters offloading their dollars in anticipation of further strengthening.

At 0700 GMT, commercial banks posted the shilling at 103.10/30 per dollar, up from last week's 103.90/104.10.

"It's more profitable to hold the shilling than the dollar," said a trader with a leading commercial bank, citing higher yields on Kenyan government securities.

The weighted average interest rate on the benchmark 91-day Treasury bill jumped to 20.637 per cent at last week's auction from 18.607 per cent at the previous sale.

Traders said there was also little demand for dollars, as importers stayed on the sidelines expecting the shilling to firm further, while exporters sold their dollars to lock in their gains in the face of the strengthening.

CBK action

The Kenyan central bank sought to mop up Sh20 billion ($195 million) from the market on Monday, saying there was excess liquidity.

The bank's frequent mop-ups of liquidity usually make it slightly more expensive for banks to build up their dollar positions, thus offering support to the local currency.