NAIROBI: The Kenyan shilling was barely moved against the dollar on Friday and traders said it was likely to remain in a narrow band, amid tightening market liquidity and sluggish demand.
At 0800 GMT, commercial banks posted the shilling at 86.35/45 per dollar from Thursday's close of 86.25/35. Traders said it would continue being stuck in a range of 86.00-86.50.
"It is not going anywhere, it is being capped by the liquidity. Liquidity is very tight at the moment," said Sheikh Mehran, a senior trader at KCB Bank.
The weighted average interest rate on the overnight interbank market rose to 10.0391 percent on Thursday from 9.875 percent the previous day, pointing to a liquidity squeeze in the money markets.
Tight liquidity usually make it expensive for banks to hold long dollar positions, offering support to the shilling. But any strengthening maybe limited to the 86.00 level where several dollar buy orders have been placed by firms, traders said.
On the other hand, if the shilling weakened to the 86.50 level, it will be met by plenty of dollar sellers who have lined up to cash in, offering it support, the traders added.
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