NAIROBI, Sept 21 (Reuters) - The Kenyan shilling hit
a new low of 96.20 against the dollar on Wednesday and traders
said it risked remaining weak unless the central bank intervenes
to support the currency.
At 0640 GMT, leading commerical banks quoted the shilling at
96.10/30, weaker than Tuesday's closing price of 95.85/96.05. It
traded at 96.20 at 0636 GMT .
The shilling set a previous low of 96.11 on Tuesday as
investors bought dollars on fears that Europe's escalating debt
woes could lead to a global banking crisis.
At an emergency meeting last week, the Central Bank of Kenya
said it would defend the shilling. But some traders said its
absence from the market on Tuesday when the shilling fell
through 96.0 for the first time showed its resolve was weak.
"The central bank needs to back up its words," said one
Nairobi-based trader. "The trend has been talk big, don't act."
Some market players said, however, that if the bank simply
offloaded hard currency the reprieve could be short.
"If central bank comes in, you may see a reprieve, the
shilling may come off its all-time low, but it's not
sustainable. The shilling will just slip back," the trader said.
"The shilling is on its own."
The shilling has lost more than 19 percent against the
dollar this year, battered by double-digit inflation,
deteriorating balance of payments and a crisis of confidence in
Kenya's monetary policy-making.
Kennedy Butiko, deputy Treasurer at Bank of Africa, said the
central bank might not intervene because the shilling's demise
was driven by strong demand for the dollar both at home and
abroad.
"If (the shilling's fall) is demand driven then any
intervention will be useless," Butiko said, adding that dollar
demand was likely to pick up towards the end of the month.
"I don't see anything pointing to a strong shilling at the
moment with all the gloom in Europe, we can only predict new
lows in the coming days," said Butiko.
