The Kenyan shilling held steady against the dollar today, Reuters reported, with traders saying they were watching for central bank action to drain excess liquidity from the money markets.
In early morning trading commercial banks posted the shilling at 89.80/90 to the dollar, barely changed from Monday’s close of 89.75/85. The shilling on Friday touched 89.85/95, its lowest level since December 2011.
“We will be watching for the (central bank) for further direction,” said Sheikh Mehran, head of trading at I&M Bank. The Kenyan currency has weakened by about 4.1% against the dollar this year, mainly due to a slump in hard currency inflows from tourism following Islamist attacks.
Inflows of dollars from tea exports have also dwindled owing to weaker prices caused by a global glut of the commodity. The central bank has regularly drained excess liquidity from the money markets in recent months.
Removing excess liquidity makes it relatively costlier to hold onto long dollar positions, which in turn helps strengthen the shilling. The bank on Monday sought to mop up Ksh20 billion ($222.72 million) in excess liquidity, a move traders said helped the local currency firm slightly.