NAIROBI: The Kenyan shilling was steady on Thursday, but traders said the currency was vulnerable and could weaken next week as month's end demand for dollars increases.
At the 0746 GMT, commercial banks quoted the shilling at 86.85/95 to the dollar from Wednesday's close of 86.80/90.
The shilling touched 87.00/87.10 on Tuesday, its weakest in more than three months, and some traders said the currency was likely to weaken to that level after the Easter holiday, when banks would close on Friday and Monday.
"Expect demand for greenback to continue being felt in the market after market break. I see 87 level next week after Easter," Bank of Africa trader Robert Gatobu said.
For now, the market was tight. Companies were draining shillings to pay value-added taxes by April 20, and rushing to pay them on Thursday, before the holiday. Banks were also squaring positions before the break, which could further support the currency.
"There is position squaring, and generally the market is a bit tight, which supports the shilling," Gatobu said.
Traders also said the central bank may stay out of the market for a second straight day due to tight liquidity, which companies draining shillings to pay the taxes.
The central bank has frequently drained liquidity over the past month after overnight domestic borrowing rates tumbled, making it cheaper for banks to fund long dollar positions, thereby putting pressure on the shilling. But the central bank said it would stay out of the market on Thursday.
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