NAIROBI: Kenya's shilling eased slightly on Thursday but traders said the currency would be supported through early next week by hard currency inflows as investors prepare to buy bonds.
By 0835 GMT, the shilling was trading at 91.50/91.60 to the dollar, compared with 91.45/55 at Wednesday's close.
Kenya's central bank will auction a new two-year and a re-opened 10-year Treasury bonds worth up to 25 billion shillings ($273 million) on Feb. 18.
"I don't think it's going to slide further until at least the bond auction is over. That should hold the shilling," said a trader at a major commercial bank in Kenya.
"We've already seen the deepening flows, at least from the offshores. They have already started positioning themselves in anticipation of the auction."
Traders are also keeping an eye out for the central bank to come into the market to mop up excess liquidity.
The central bank has mopped up a total of 31 billion shillings ($338.58 million) in excess liquidity from the money markets on Monday and Tuesday - the first mop ups since Jan. 21.
The action came after the shilling was buoyed late last week by hard currency inflows from coffee and tea exports and a large influx of foreign direct investment.
The central bank did not conduct a mop up on Wednesday.
"Liquidity seems to be quite a lot so we expect to see them (central bank) coming in to mop up liquidity in the money markets," said Martin Runo, a senior trader at Chase Bank.
The shilling has lost 1.3 percent to the dollar so far this year, after losing ground steadily over the past year.
The decline has been due largely to the strength of the dollar as well as a stark drop in tourism following a spate of militant attacks near Kenya's Indian Ocean coastline.
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