NAIROBI: The Kenyan shilling was flat on Tuesday but was expected to weaken due to expected demand from importers for dollars amid scant hard currency inflows.
At 0830 GMT, commercial banks quoted the shilling unchanged at 88.90/89.00 to the dollar.
The currency of East Africa's biggest economy on Monday slipped briefly to a 32-month low of 88.95/89.05, Reuters data showed.
Traders said there was little inflow of dollars from the tea and tourism sectors, which are leading foreign exchange earners, to meet increased demand from importers.
The market was also awash with the local currency due to renewed government spending and bond maturities, traders said.
"The shilling is still on the back foot. The only reprieve would be the central bank's intervention by selling dollars," Nahashon Mungai, trader at Kenya Commercial Bank, said.
"Fundamentals show more demand than supply of dollars."
The central bank has regularly soaked up excess liquidity in the money markets since last year.
On Monday the bank drained excess liquidity for the eighth trading session in a row. The action supports the shilling by making it more costly to hold dollars.
However, some traders said the central bank may have to sell dollars to defend the shilling from weakening further.
Some other traders said this action would only serve to deplete the bank's own foreign exchange reserves, arguing that it was difficult to successfully reverse the tide against market fundamentals, where dollar demand far outstrips inflows.
In late August, the central bank sold dollars into the market after the shilling hit 88.80/90, which at the time was its lowest level since December 2011.
Traders said they expected the shilling, which has lost about 2.6 percent against the dollar this year, would trade in the 88.60 to 89.10 range this week.
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