RTRS:Kenya shilling cuts losses vs dollar, seen firming
* Shilling seen at 97-98 level vs dollar by Wednesday
* Central bank in the market for $25 mln in repos
(Updates rate, adds repo)
NAIROBI, Oct 17 (Reuters) - The Kenyan shilling pared
losses against the dollar midway through Monday's session,
helped by banks selling dollars to meet the central bank's
requirement that they should reduce the amount of dollars they
hold, traders said.
Commercial banks have been selling dollars after the central
bank lowered the amount of foreign exchange they could hold from
20 percent to 10 percent of their core capital last week and the
regulator mopped up liquidity through repurchase agreements.
The Central Bank of Kenya said it was in the market to mop
up 2.5 billion shillings ($25 million) from the market through
repurchase agreements in a continued drive to drain liquidity in
line with a tightening stance aimed at stopping extreme
volatility in the exchange rate and rampant inflation.
The bank absorbed 2.45 billion shillings ($24.5 million)
last week, well below the 30 billion shillings it had targeted,
as banks held back their bids.
At 1051 GMT, leading commercial banks quoted the shilling at
99.65/85 against the dollar -- after touching a low of
100.70/101.10 early -- weaker than Friday's close of 99.45/65.
"It had fallen a bit on importers dollar demand. But with
banks selling dollars to reduce their holding from 20 percent to
10 percent as central bank asked is helping the shilling," said
a trader with one commercial bank.
"We could see it trade at 97 or 98 per dollar from
Wednesday."
The shilling had weakened 1.4 percent against the dollar
earlier on Monday, as importers took advantage of last week's
7.5 percent shilling gains and bought greenbacks.
The locally currency recovered from a record low of 107 per
dollar hit on Oct. 11 as
Market players said they did not expect the deployment of
Kenyan troops inside Somalia to hunt down al Qaeda-linked rebels
to impact the market immediately.
"It will depend with the level of attack that we launch into
Somalia. At the moment it looks like it's just (a small amount
of) troops targeted toward the al Shabaab," said a senior trader
at another commercial bank.
