Kenya’s shilling firms against the dollar

Kenya’s shilling firmed against the dollar on Wednesday, with interbank shilling trade offsetting dollar demand from fund managers and telecommunications companies.

At the close of trade at 13:30, commercial banks quoted the shilling at 105.25/35, stronger than Tuesday’s close of 105.35/50.

One trader at a Nairobi-based commercial bank said the local currency had firmed due to interbank demand for shillings, which is down about 16 percent against the dollar this year.

“There is a lot of interbank trading today and that’s pushed the shilling lower (stronger),” he said, adding that there was still some demand for dollars for local fund managers and companies in the telecommunications sector.

A second trader said earlier in the day the shilling had received support from a huge central bank intervention on Tuesday, which was the second consecutive session where the central bank sold dollars to support the local currency.

The shilling had been edging closer to its record low of 106.80 set in October 2011, and slipped to 106.55/75 against the dollar when the bank intervened on Tuesday.

The shilling has come under pressure from a broad rally in the dollar, Kenya’s high current account deficit and poor foreign currency inflows from tourism after attacks by Somalia’s al Shabaab insurgents.

The benchmark NSE20 share index was barely changed, drifting 3.05 points higher to close at 4,219.89 points.

The secondary market, government bonds valued at 1.1 billion shillings ($10.47 million) were traded, up from 985 million shillings traded on Tuesday.