Shilling weakens as importer dollar demand rises

Kenya’s shilling weakened slightly in early trading on Tuesday as importer demand for dollars picked up although it was still finding some support from a shortage of shilling liquidity.

By 0703 GMT, the shilling was quoted at 105.30/50, compared with Monday’s close of 105.20/30.

Traders noted demand from energy importers seeking dollars late in Monday’s session, and said demand was likely to pick up as the month draws to a close.

Demand tends to rise at the end of the month as companies meet contract payment deadlines.

“It is likely there will be some pressure in the next few days,” one trader at a commercial bank said.

However, the shilling was still finding some support because of a shortage of shilling liquidity, which has been driving up overnight rates.

Rates have been climbing towards 27 percent this week, traders said, up from 13 percent earlier this month.

The shilling, which has lost about 14 percent of its value since the start of the year, has also been helped in recent days from inflows of foreign exchange from offshore investors seeking to buy government securities, where yields have been rising. (REUTERS)