TA:Kenyan shilling pushed down by dollar demand from energy sector
NAIROBI (Reuters) - The Kenyan shilling slipped against the dollar on Monday, driven by demand from importers in the energy sector for the U.S. currency, and remained weak after an injection of shillings by the central bank through reverse repos. Traders said they expected increased demand for dollars for oil imports as oil demand was likely to rise after power distributor Kenya Power announced power cuts from July 27 due to a lack of adequate water in hydropower dams. Central Bank of Kenya said on Monday it was offering 19.0 billion shillings in reverse repurchase agreements at a rate of 6.25 percent for seven days. The bank injected a total of 18.89 billion shillings in two reverse repos last week. At 0916 GMT, commercial banks quoted the shilling at 90.30/50 against the dollar -- unchanged by central bank's announcement -- and weaker than Friday's close of 90.15/35. Traders said they expected the shilling to trade in the 90.00-91.00 range against the dollar on Monday. "The shilling has weakened slightly on energy sector (dollar) demand. For this week the shilling may continue to weaken on the back of end-month demand," said Wilson Mutai, a trader at African Banking Corporation. Traders said the shilling was unlikely to be affected by the central bank's liquidity injection, but they expected end-month demand for dollars to weigh on the currency. "The repos shouldn't affect much because the market is short for shillings. Ideally it (the repos) should support a stronger dollar, but the market is very illiquid and, secondly, guys are paying for bonds today," said Mutai. Kenya's sole electricity distributor, Kenya Power, said it would begin daily power cuts starting on July 27 for an unspecified period, due to low water levels at hydropower dams and a decline in fuel-based power supply. "We might see some demand from the market weaken (the shilling) further, mainly from the energy sector," said Bhavin Chandaria, a trader at Imperial Bank. "It (the electricity rationing) may not be directly linked, but the fact is we are short of energy."
