Kenyan shilling stuck in a tight range against the dollar

The Kenyan shilling was broadly stable on Thursday as improved liquidity in the money markets kept up the pressure, offsetting the impact of lower demand for dollars by importers.

At 0700 GMT, commercial banks posted the shilling at 103.1525, barely changed from Wednesday’s closing rate of 103.2535.

“Liquidity is still putting pressure,” said a senior currency trader at a commercial bank, referring to lower overnight lending rates, which usually make it cheaper for banks to build up dollar positions.

The weighted average interest rate for overnight borrowing for banks stood at 17.2604 per cent on Tuesday from 18.1622 per cent the previous day.

Traders said there was lower demand for dollars, as importers waited to see how far the shilling will strengthen, but the impact of the sluggish demand was being curbed by easing the liquidity conditions.

CBK action

Central bank sought to mop up Sh5 billion ($48.50 million) from the market on Thursday saying there was excess liquidity.

The bank normally takes out excess liquidity, to prevent overnight lending rates from falling too low thus making it slight cheaper for banks to bet against the shilling, to maintain stability in the foreign exchange rate.