NAIROBI: The Kenyan shilling was unchanged on Thursday, supported in part by expectations of hard currency inflows from offshore investors in a government bond.
At 0840 GMT, the local currency of East Africa's biggest economy traded at 89.30/40 to the dollar, unchanged from Wednesday's closing level.
The central bank on Tuesday announced an additional sale of a 12-year government infrastructure bond worth 20 billion shilling ($220 million), attracting currency inflows that balanced end-month dollar demand from importers.
"The shilling is rock solid, largely because the bond sale is keeping the shilling steady. It is boxed between a range of 88.90 to 89.50 to the dollar for the next few days," said a senior trader at Citi who did not want to be named.
The central bank supported the currency by selling dollars last month when the shilling reach the 89.50 mark.
However, the shilling is expected to have a weakening bias once the effect of the bond issue wears off, another trader said.
"(The shilling) will weaken after the auction because importers are still in the market," National Bank of Kenya trader, Ian Kahangara, said.
The shilling was, however, unlikely to weaken beyond the resistance level of 89.50 to the dollar, Kahangara said.
The local currency weakened slightly late on Wednesday after banks bought dollars to cover their short positions, indicating that importers were still chasing dollars, traders said.
The absence of the regular mop-up of excess shilling liquidity by the central bank had also weakened the local currency, traders said.
By mopping up liquidity, the central bank supports the shilling by making it more costly to hold dollars.
Overall, the shilling has been under pressure for much of the year, largely because of a sharp drop in tourist arrivals, a major source of hard currency, because of a spate of Islamist attacks on the coast and elsewhere. A sharp drop in tea earnings owing to a global glut has also dented hard currency inflows.
Comments
Comments are closed.