The Kenyan shilling steadied on Thursday, and traders expected it to stay in its recent tight range against the dollar supported by the central bank's proactive stance in the market, whereby it has consistently absorbed excess liquidity.
At 09:16 Sa time, commercial banks quoted the shilling at 83.85/84.05 per dollar, barely changed from Wednesday's close of
“The little demand (for dollars) in the market is being easily met by supply of dollars from the agriculture sector,” said a trader at one commercial bank.
“The central bank's mopping up of liquidity will continue to support the shilling, but this could change if some mid-month demand comes in.”
The shilling has been relatively stable this year, supported by the central bank's tight monetary policy, but the bank cut its benchmark rate this month to shore up the economy and that could pressure the currency as it makes it easier for importers to access credit. A gaping current account deficit also continues to pose a risk for the currency.
A widening current account deficit pushed the shilling through a series of record lows last year, before policymakers raised lending rates.
“We expect less shilling volatility with a bias towards depreciation on account of lower interest rates, ... and a widening current account deficit,” said Stanbic Investment in a quarterly report.
“Increasing forex reserves and a consistent monetary policy may support the shilling.” - Reuters