NAIROBI (Reuters) - The Kenyan shilling gained ground against the dollar midway through Tuesday's session after the central bank sold dollars to banks, the second such intervention by the regulator in two weeks, traders said.
The shilling, which on Monday touched a fresh record low of 95.65 against the dollar, was trading at 94.70 per dollar, having jumped to 94.0 per dollar at 0831 GMT from 95.50 in early trading, Reuters data showed.
Traders said the shilling could find further support later this week when the central bank holds an extraordinary meeting of its rate-setting committee on Wednesday.
The Kenyan currency has been battered over the last month due to worries inflation would run out of control and a surge in local interbank lending costs, which authorities have now managed to rein in.
The committee is widely expected to raise the benchmark Central Bank Rate (CBR) from 6.25 percent to see off exchange rate volatility in the face of high inflation.
"They (CBK) are selling to small banks in small lots of $500,000," said a senior trader with a leading commercial bank who did not want to be named.
Traders had expected a quiet session after the euro recovered on international markets on news that Italy may get financial support from China.
The shilling depreciated as much as 1.6 percent in intraday trade on Monday as investors sold risky assets in emerging markets on concern over the outcome of a Greek debt swap deal and fears the indebted country is edging towards a default.
In money markets, the weighted average interbank lending rate extended its two-week fall on Monday to 5.2907 percent from 5.6601 percent previously, central bank data showed on Tuesday. Continued...
