NAIROBI (Reuters) - The Kenyan shilling weakened on Thursday as importers bought dollars, after the acting finance minister's comments on capping the strength of the local currency, traders said. Acting Finance Minister Robinson Githae told Reuters on Tuesday he had instructed the central bank to prevent the shilling from appreciating beyond 82 per dollar, to cushion exporter's earnings, spooking the market. The shilling was 0.2 percent weaker with commercial banks quoting it at 83.25/45 per dollar, from 83.05/83.25 at the close on Wednesday. "The sentiments of the finance minister's comment triggered (dollar) buying," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. "But government yields are still attractive so we might see inflows capping the shilling losses." Yields on Kenya's 182-day Treasury bills fell to 18.757 percent from 19.247 percent in an oversubscribed auction on Wednesday as offshore debt hunters sought to lock in rates which may trend lower after inflation fell. The central bank is selling 4 billion shillings of 91-day Treasury bills on Thursday. A trader who did not wish to be named said there was heavy dollar demand by the energy sector, while tea inflows, one of the key support factors for the local currency, were low. Two tea auctions in the world's leading exporter, Kenya, were postponed this week due to a tax row, but resumed on Wednesday. Traders said a drop in Kenya's inflation rate for a third straight month to 16.7 percent in February from 18.3 was expected to give the central bank headroom to start easing its tight monetary stance. The shilling is up 2.3 percent this year, extending a rally at the end of last year after the central bank raised its key lending rate by 11 percentage points in less than three months to prop up the shilling and curb double-digit inflation. The bank's Monetary Policy Committee is scheduled to meet on March 6.

Source