The Kenyan shilling recouped some of its losses on Friday after weakening due to banks covering their short positions ahead of an expected increase in domestic money market liquidity, while stocks barely moved. At 0740 GMT, commercial banks posted the shilling at 102.15/25 per dollar, down from Thursday's close of 101.80/102.00. "It eased off after touching 102.35/45, when some little dollar inflows came in," a senior trader at one commercial bank said.
Traders said a shortage of local currency, which sent overnight lending rates to a high of 26.25 percent, was likely to ease next week as a new cycle for banks' liquidity ratios kicked in. Banks are required to keep a cash reserve ratio of 5.25 percent of their deposits for a month starting on the 14th of every month but have the leeway of going down to 3 percent, as long as the average for the month adds up to the required ratio.
Short-term rates jumped after the central bank adopted a monetary tightening stance in June to curb volatility in the foreign exchange market. The shilling is down 11.3 percent against the dollar this year, mainly due to expectations of a US interest rate hike, a slump in tourism caused by militant attacks and a surge in dollar demand for imports.
On the Nairobi Securities Exchange, the main NSE-20 Share Index was barely changed, closing 0.70 points higher at 4,496.23. On the secondary market, government bonds valued at 105.4 million shillings were traded, up from 503.75 million shillings traded on Thursday.
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