NAIROBI, Dec 5 (Reuters) - The Kenyan shilling was steady against the dollar on the back of interbank greenback selling, coupled by slowed exporters' demand for the U.S currency, traders said on Monday. Traders said the shilling would be stuck in a tight range and that the market was also eyeing the central bank to mop up shillings, after it came into the market for 4.25 billion shillings ($47.1 million) on Friday. Traders said the tight monetary stance taken by the central bank to help cool inflation had made the shilling more attractive, taking a cue from the relatively high interbank rates at 24.7 percent as of Friday. At 0800, commercial banks quoted the shilling at 89.60/80, slightly firmer than Friday's close of 89.65/85 "We have seen interbank (dollar) selling this morning and (dollar) demand is seen subsiding on the buy side," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. Traders said the Monetary Policy Committee's (MPC) 1.5 percentage point increase on the central bank rate to 18 percent had no major effect on the local currency, since the market was ahead of the curve, with the central bank seen playing catch-up. "At 18 percent the MPC is now aligned to market levels because the market was already at that level on the interest rates side so the central bank and the market are now at par," Christoper Makombe, a trader at Standard Chartered, said. "The market has a feeling we are at the top on interest rates so we did not see a significant sell-off of dollars against the Kenyan shilling on the back of the MPC raising interest rates," said Makombe. A trader from a commercial bank who did not want to be named said there was some liquidity which had trickled in from the government for recurrent expenditure, which he said would prompt the central bank to mop up. Traders said the shilling would trade within a range of 89.50-90.50.

Source