At the 1300 GMT close of trade, commercial
banks posted the shilling at 87.65/75, compared to 87.80/90 the
previous day. One currency trader attributed the move to a liquidity
squeeze in the money markets due to a delay in the release of government
funds to local authorities.
The weighted average interest
rate on the overnight borrowing market for banks rose to 7.8038 per cent
on Thursday from 7.6651 per cent the previous day. Tighter liquidity in
the money markets usually makes it slightly more expensive for banks to
fund long dollar positions, cushioning the shilling.
Traders said the shilling could
come under pressure next week when the government releases funds
combined with the traditional end-month demand for dollars by importers.
"We might see liquidity improve next week," said a trader with a leading commercial bank.
The shilling has been stuck in a
tight band of 87.50-88.00 for weeks, with worries over militant attacks
limiting its gains. The central bank has also signalled it does not wish
to see it slip below the 88.00 level.
On the stock market, the
benchmark NSE-20 share index, was barely changed, shedding a modest 4.67
points to close at 4,879.09 points.
"It has been treading water,"
said Aly Khan Satchu, an independent trader and analyst, adding that
investors were still waiting for interest rates to fall after the
country issued its debut Eurobond last month before shifting out of
cash.
Kenya borrowed $2 billion (about
Sh175 billion) via the Eurobond issue at lower than expected interest
rates but that has yet to trickle into the domestic market, where
lending rates remain obstinately high.
Shares of Safaricom, Kenya's
largest telecoms operator, rose 1.67 per cent to 12.20 shillings each
after a parliamentary committee approved the award of a key security
system contract by the government to the firm.
In the debt market, bonds worth Sh2.79 billion were traded, slightly up from the previous day's volume of Sh2.66 billion.
# KIM #
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