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Kenyan shilling stable, seen under pressure due to drought

Kenyan shilling stable, seen under pressure due to droughtNAIROBI: Kenya’s shilling was steady at near 3-year lows on Thursday but was expected to come under pressure on anticipated dollar demand from corporate and food importers in a country that is facing drought.

The shilling was trading at 92.80/90 against the dollar at 0901 GMT, barely changed from Wednesday’s close of 91.85/95.

The central bank sold an undisclosed amount of dollars on Monday when the shilling weakened sharply against the US currency. The local currency has since traded in a tight range.

Joshua Anene, a trader at Commercial Bank of Africa, said there was a “mismatch between demand and supply” and that the shilling will remain under pressure.

“The demand still outweighs supply significantly and it’s not getting any better now that we have to import food again because of bad weather,” Anene said.

It is not yet clear how much extra food Kenya will have to import as a result of the drought.

The drought in some food producing areas is also curbing the output of tea, one of the biggest foreign exchange earners for east Africa’s largest economy, which could dent dollar inflows at a time when the tourism sector is ailing.

A spate of bomb and grenade attacks by Somali Islamist militants scared off potential visitors, starving the economy of a vital source of hard currency.

Traders said shilling has been receiving support from regular local currency purchases by the central bank.

The central bank said on Thursday it planned to mop up 3 billion shillings ($ 33 million) in excess liquidity from the money markets.

Copyright Reuters, 2015

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