Economy

Kenyan shilling weakens on energy sector dollar demand

Date: Jun 22, 2015

Kenya's shilling continued weakening on Monday on rising dollar demand from the energy and other sectors, and traders said they expected the local currency to lose further ground.

At 0830 GMT, commercial banks quoted the shilling at98.60/70 to the dollar, from Friday's close of 98.40/60.  

 "There has been sustained demand, especially from the energy sector, so it's a continuation of the theme," said a senior trader at a major commercial bank, adding the currency could hit the 100 to the dollar level by the end of the week.   

"There is heavy corporate demand and the current account deficit is a mess. So unless that is addressed, the currency will continue weakening," the trader said.  

 Kenya said in April the current account deficit had increased by 30.2 percent to 536.1 billion shillings in 2014.     A second trader gave a slightly more optimistic outlook, saying the shilling would likely hit the 99 level this week, but also said the local currency is on a weakening trend.    "In the absences of dollar flows, we expect the shilling to continue losing," the trader said.   

The central bank said it planned to mop up 12 billion shillings ($122 million) in excess liquidity from the money market. Absorbing excess liquidity makes it more expensive to hold dollars, which in turn supports the shilling.

--reuters—

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