Kenya’s shilling traded steady on Monday with dealers expecting the week’s regular treasury bill auctions to bring a fresh influx of foreign cash, seeking to take advantage of high domestic interest rates and pushing the currency higher.
The shilling has firmed 3 percent this year, extending a recovery from October’s record low of 107 against the dollar, due largely to the central bank’s raising of benchmark rates to 18 percent.
The regulator has held fire with any further move up or down at its last two meetings and is scheduled to consider rates next on March 6.
At 0642 GMT, commercial banks quoted the shilling at 82.55/75 against the dollar, barely changed from Friday’s close of 82.50/70.
“We still expect the shilling to be firmly supported by the high yields on the local currency with investors targeting government securities that are giving a very good return,” said the Bank of Africa said in a note to clients.
“Also, the forward contract market that usually drives the shilling weaker is in limbo due to the high cost of accessing credit thus giving the shilling a boost,” it said.
Traders also said the expected heavy demand for Treasury Bills may push yields slightly lower at this week’s auctions.
The Central Bank of Kenya is due to sell 7 billion shillings of 91-day and 182-day bills in sales on Wednesday and Thursday.
Traders said the central bank was also likely to take advantage of the stronger shilling to build its foreign currency reserves.