NAIROBI, Aug 11 – Kenya’s shilling is expected to firm against the dollar next week after recovering from an all-time low, bucking a trend in African currencies which are under additional pressure because of the global flight from riskier assets.KENYA
Kenya’s shilling is seen firming against the dollar after the central bank said on Wednesday it would stop injecting liquidity through reverse repurchase agreements.
The shilling recovered from an all-time low of 95.10 against the dollar on Tuesday.
Traders said they expected liquidity to tighten further in the coming week as value added taxes fall due by Aug 20.
At 1424 GMT, commercial banks quoted the shilling at 93.25/55 against the dollar, weaker than last Thursday’s close of 92.20/40.
“The central bank’s move is going to calm the foreign exchange market. Liquidity is going to be affected but that is a price we need to pay,” said Solomon Alubala, head of trading at Co-operative Bank of Kenya.
Traders said they expected interest rates to rise as liquidity tightens further in the money market.
The weighted average rate for overnight borrowing on the interbank market crept up to 6.7429 percent, from 6.5148 percent on Wednesday. Borrowed volumes jumped to 6.73 billion shillings ($71.5 million) from 4.36 billion shillings.
“Either we pay a price on the exchange rate or we pay a price in interest rates, which are definitely going to rise,” added Alubala.
Source: Reuters Africa newsletter
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