UPDATE 1-Kenyan shilling slips vs dollar, stocks extend fall

* Inflation plunge gives room for interest rates to fall
* Cbank mops up $60 mln via repos
* Shares fall for third session on lower volume

(Recast with markets close, stocks)
By Kevin Mwanza
NAIROBI, July 31 (Reuters) - The Kenyan shilling
slipped against the dollar on Tuesday, weighed down by importers
buying the greenback to meet their end of month obligations as
official data showed inflation plunged in July, while shares
fell for a third straight session.
At the market close, banks posted the shilling at 84.15/35
per dollar, slightly weaker than Monday's close of 84.10/30, but
still within its range of the past month of 84.00-84.50.
"There is still some end-month corporate (dollar) demand in
the market that's weighing on the shilling," said Dickson
Magecha, a trader at Standard Chartered Bank.
Traders said a bigger-than-expected inflation fall to 7.74
percent in July from 10.05 percent in June, had given room to
cut interest rates further, but cautioned that the central bank
should support the currency from a steep fall.
They said increased liquidity in the market, due to
redemption of maturing government debt, posed a downside risk to
the shilling, although the central bank could counter that by
mopping up liquidity through repurchase agreements (repo) as it
has done most of this year.
During Tuesday's session, the central bank mopped up 5
billion shillings ($59.3 million) in excess liquidity through
repos. It received bids worth 14.5 billion shillings for the 8
billion it had offered.
The weighted average interbank rate dropped for a sixth
straight session to 10.8 percent on Monday, from 11.2 percent on
Friday.
"With inflation where it is, it gives room for rates to come
down. But the shilling still need some support," said Ignatius
Chicha, head of markets at Citibank.
In stocks, the benchmark NSE-20 Share Index fell
for the third straight session, down by 0.6 percent to 3,832.42
points.
"Investors are still taking profit on the recent rallies,
but at a slower pace looking at the volume, which was down 64
percent," said Ronald Lugalia, an analyst at Africa Investment
Bank.
He said the market would stabilise from more solid half-year
financial results expected in the coming weeks.
Shares in Equity bank, Kenya's largest bank by
depositors and one of the most traded stocks, extended their
previous day's fall by 3.4 percent to 21.50 shillings.
Tea and coffee producer Sasini shed 3.2 percent to
12.15 shillings.
In the bond market, government and corporate bonds worth 2.9
billion shillings were traded, up from 1.3 billion shillings on
Monday, with most activity on the five-year bond at a yield of
13 percent from 12.75 percent previously.
...........................Shilling spot rates
.....................Shilling forward rates
.......................Cross rates
..................................Local contributors
.......................Central Bank of Kenya Index
.....................Kenyan Bonds contributor pages
...............Treasury bill yields
..................Central bank open market operations
.........................Horizontal repo transactions
, ................Daily interbank lending rate
.............................Kenya Bond pricing
..................Real time Africa economic data
<ECI & AFR> ...........................African economic news
.................................NSE-20 Share Index
.................................NSE All Share Index
...........................FT NSE Kenya 15 Index
.......................... FT NSE Kenya 25 Index
SPEED GUIDES:

($1 = 84.3000 Kenyan shillings)

(Editing by James Macharia, Ron Askew)