NAIROBI: The Kenyan shilling strengthened further on Tuesday, helped again by tight local currency liquidity in the money markets, traders said.
At 0746 GMT, commercial banks quoted the shilling at 100.95/101.15 to the dollar, from Monday’s close of 101.35/45.
Liquidity tightened, with the weighted average interbank lending rate rose to 19.8170 percent on Monday from 19.2121 percent a day earlier, and some banks borrowed at rates as high as 21 percent, according to Thomson Reuters data.
“Liquidity is very tight. Things are bad in terms of liquidity, so people are selling dollars to buy shillings,” a senior trader at one commercial bank said.
Traders said the shilling had strengthened to touch 100.80/90 in early trade before giving up some gains when there was a general increase in dollar buying from corporate clients.
“This is on the back of renewed interest from corporates at better levels, to take advantage of these levels, because the rates are fairer. Inquiries are from all counters,” a trader at a second commercial bank said.
The trader said the shilling was also getting some support from market expectations that the central bank will raise its benchmark lending rate on Wednesday when its Monetary Policy Committee meets. Analysts polled by Reuters the bank to raise the rate to 12 percent from 11.50 percent.
