NAIROBI: Kenya's shilling strengthened slightly on Tuesday on remittances from Kenyans abroad and a mop-up of excess liquidity by the central bank, while stocks fell.
The shilling closed at 90.55/65 to the dollar, compared with 90.60/70 at Monday's close.
Duncan Kinuthia, head of trading at Commercial Bank of Africa said there were improved dollar inflows coming in from Kenyans' overseas in the run up to the Christmas break.
Money sent home by Kenyans living abroad - or remittances - is one of the country's main sources of foreign exchange.
Kenya received remittances worth $1.06 billion in the first nine months of this year, compared with $951 million in the same period in 2013, according to central bank data.
Kenya's central bank on Tuesday said it mopped up 7.45 billion shillings ($82.27 million), having sought to take out 10 billion shillings in excess liquidity from the money market.
By absorbing excess liquidity, the bank makes it relatively more expensive to hold long dollar positions, which lends support to the shilling.
"The shilling should start gaining as we see dollar demand subsiding against dollar inflows from abroad. I expect the shilling to be around 90.50 by Friday," said Martin Runo, senior trader at Chase Bank.
The shilling has hovered in recent weeks around three-year lows, due in part to dollar demand from importers and falling tourist numbers - another key source of hard currency inflows for east Africa's biggest economy - following a number of Islamist attacks in the country.
The shilling has lost 5 percent against the dollar this year.
On the Nairobi Securities Exchange, the main NSE-20 Share Index inched 0.3 percent or 15.37 points lower to close at 5,106.67 points.
Government bonds valued at 1.1 billion shillings were traded on the secondary market, up from 241.25 million shillings on Monday.
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