Nairobi - Kenya's shilling weakened to new three-year lows on Monday on dollar demand by importers but tight liquidity in the money markets kept it from falling even further.
At 08h16 GMT, commercial banks quoted the shilling at 97.65/75 to the dollar - a new low last touched in November 2011 - compared with Friday's close of 97.40/50.
Traders said there was tight liquidity arising from payments being made in local currency for Treasury bonds and bills that were auctioned last week.
The central bank auctioned a 10-year and a two-year Treasury bond worth 25.29 billion shillings ($259 million) and Treasury bills worth a total 3.29 billion shillings.
“There's still some bit of dollar-buying this morning. It (shilling) is supported by tight liquidity in the market. It's because today we expect the payments from the bond and bills,” Martin Runo, senior trader at Chase Bank, said.
Tight liquidity makes it expensive to hold dollars, which in turn supports the shilling.
The weighted average interbank lending rate rose to 12.0645 percent on Friday from 11.5158 percent, pointing to tight shilling liquidity.
Traders said they forecast the shilling to trade in the 97.30 to 97.80 range in the next few days.
Reuters