Kenya's shilling holds steady, supported by tight liquidity

NAIROBI (Reuters) - The Kenyan shilling was little changed on Tuesday, with a trickle of end-month dollar demand offsetting tight shilling liquidity. The shilling, which has lost about 13 percent against the U.S. currency this year, was trading at 102.45/55 to the dollar at 0655 GMT, compared with 102.50/60 at Monday's close. A trader at one Nairobi-based commercial bank said rising rates on the overnight borrowing market for banks should support the local currency and offset demand for dollars from companies with bills to settle at the end of the month. "The market is very quiet," said the trader. "I believe it will stay in a range and we will have a quiet couple of days." The weighted average interbank lending rate rose to 14.2728 percent on Monday from 13.6129 percent on Friday. Tight liquidity makes it expensive to hold dollars, which gives the shilling a boost. The central bank, which has warned the market it will act to prevent extreme shilling volatility, mops up excess liquidity almost every day to support the local currency. The bank has already boosted interest rates by 3 percentage points to 11.5 percent since June and intervened at least three times last week to sell dollars to support the shilling. The next Monetary Policy Committee meeting is on August 5. The shilling has been under pressure from the global strength of the dollar, a slide in valuable tourism revenues and a widening current account deficit.