Nairobi - Kenya's shilling weakened on Monday, with banks covering short dollar positions and traders saying they expected the local currency to ease even further.
At 08h02 GMT, commercial banks quoted the shilling at 95.80/90 to the dollar, a new low last seen in November 2011, compared with Friday's close of 95.40/50.
“Banks are covering short positions that they accumulated over the weekend. It's trading with caution,” Chris Muiga, a senior trader at National Bank of Kenya said, noting that banks were buying dollars in anticipation that the shilling could weaken further.
“The shilling's outlook still remains bleak, with the likelihood of the dollar/shilling pair breaching the key 96.00 mark during the week,” Commercial Bank of Africa said in its daily market report.
The shilling has been under pressure in recent weeks due to falling revenues from tourism and horticulture - leading sources of foreign exchange for East Africa's biggest economy - and by concerns about a rising import bill.
Traders said they forecast the shilling, which has lost 5.3 percent to the dollar so far this year, to trade in the 95.50 to 96.50 range in the next few days.
Technical analysis of the 14-day and 50-day weighted moving averages suggested the shilling would stay on a weakening trend in the near term.
Kenya's central bank said it planned to mop up 13 billion shillings ($136 million) in excess liquidity. Mopping up liquidity makes it expensive to hold dollars, which in turn lends support to the shilling.
Reuters