The Kenyan shilling was unchanged on Monday on a steady inflow of dollars to be used for buying the country's high-yielding government debt, with traders saying the currency could strengthen in the short term.
Shilling unchanged, with further strengthening seen
At 0715 GMT, commercial banks posted the shilling at 102.15/25 to the dollar, the same as Friday's close.
A fuel attendant handles Kenyan shilling notes at a petrol station in the capital Nairobi March 15, 2011. REUTERS/Noor Khamis
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In recent weeks traders have reported growing dollar inflows from foreign investors who have been attracted by interest rates on government Treasury bills of more than 20 percent, far above what Kenya usually pays for short-term debt.
"It comes down to how badly the government wants to keep things in control," said a trader at one Nairobi-based commercial bank, adding the local currency would likely trade at around 101.50-102.50 in the short term.
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The trader said it was unclear how long the government could sustain such high yields and that the shilling, which has lost 12 percent against the dollar so far this year, could depreciate in the early part of next year as the government increases spending, particularly for infrastructure.
The currency has weakened consistently over the last year due to a decline in tourism, a major foreign currency earner, and a high current account deficit.
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