Kenyan shilling stays at 3-year-lows, central bank action eyed

NAIROBI (Reuters) – Kenya’s shilling was hovering at three-year lows on Wednesday but avoiding a further slide due to expectations that the central bank could offer support by selling dollars.

At 0800 GMT commercial banks quoted the shilling at 93.35/45 to the dollar, compared with 90.30/50 to the dollar at Tuesday’s close – a level last seen in November 2011.

“Fundamentally, it looks weak. What’s keeping it from weakening further is the probability of the central bank intervening in the market,” said Sheikh Mehran, head of trading at I&M Bank.He said if the shilling weakens below the 93.50 level, “93.80 is definitely on the cards.

“The central bank sold an unspecified amount of dollars to banks last week when the shilling fell to 92.82/92.

On Tuesday, the bank said it was monitoring the foreign exchange market and had enough reserves “to cushion the exchange rate against these short-term shocks and volatility.

“The central bank says it only intervenes to contain volatility but not to support any targeted exchange rate.

Traders said barring any central bank action, the shilling was likely to stay under pressure in the days ahead due to slowing dollar inflows from tea and horticulture exports as well as from tourism, a key foreign exchange earner, which has slowed in the wake of a spate of Islamist militant attacks.