Shilling hits seven-month low versus dollar at 87

The shilling weakened through the 87 per dollar level early yesterday to hit a seven-month low, pressured by energy sector demand for hard currency, traders said. Market players said the central bank had appeared keen to maintain that support level and might sell dollars in the market to stem further losses.

In early trading, the shilling dipped to 87.05, Thomson Reuters data showed. It had last traded weaker than 87 last May. Leading commercial banks quoted the currency at 86.90/87.00, a touch weaker than Thursday's close of 86.85/95.

"There has been a bit of energy-related dollar demand that has caused the shilling to slide," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

The shilling has fallen almost one per cent against the dollar so far this year. Technical analysis showed its next support level at 87.50. "They (the central bank) have been keen to contain the shilling below the 87.00 level," said Kinuthia.

"At some point ... (the bank) might have to come in. I don't think they want the shilling to weaken sharply," said Dickson Magecha, a trader at Standard Chartered Bank. The bank, which has regularly intervened to mop up liquidity to support the local currency, has sold an undisclosed amount of dollars in three separate sessions this year.