Kenya’s central bank is seen mopping up liquidity from the market to support the Kenyan shilling in coming days, traders said on Tuesday, when the currency held steady against the US dollar.
Commercial banks quoted the shilling at 83.00/20 per dollar, at the 1300 GMT close of traDE, barely moved from Thursday’s 83.05/25 close. The market was shut on Friday and Monday for the Easter holidays.
“Most banks were sleeping with money in their clearing accounts. There was excess liquidity in the market probably from (debt) redemptions and the government releasing cash,” said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
The central bank received 8.05 billion shillings ($97 million) for 5 billion shillings worth of repurchase agreements it had offered during the session. It accepted 5 billion shillings at a weighted average interest rate of 15.4 percent.
Policymakers said on April 4 that the bank would actively intervene in the money markets to reduce volatility in the interbank rate and bring it closer to the policy rate. They held the benchmark rate at 18 percent for the fourth straight month last week, indicating it was prepared to stay put until all the conditions for an easing cycle were firmly in place.
The weighted average interbank rate fell to 10.3 percent on Thursday from 12.7 the previous day. Still, currency traders said the strengthening of the shilling could be curbed by the central bank’s purchase of hard currencies in the market to shore up its reserves.
“The Kenyan central bank is supporting the US dollar by buying at the 82.50 level,” said Dickson Magecha, a trader at Standard Chartered Bank.