Kenyan shilling steady, seen firming as central bank drains liquidity

NAIROBI, April 14 Mon Apr 14, 2014 4:54am EDT

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NAIROBI, April 14 (Reuters) - Kenya's shilling was little changed on Monday against the dollar, but traders expected the currency to strengthen during the week as the central bank mops up liquidity and companies sell dollars to pay taxes.

Leading commercial banks quoted the shilling at 86.60/70 at 0801 GMT, from 86.55/65 on Friday.

The Central Bank of Kenya (CBK) has frequently drained liquidity over the past month after overnight borrowing rates tumbled. The falling overnight rate made it cheaper for banks to fund long dollar positions and put pressure on the shilling.

By removing excess liquidity from the market, the central bank makes it more expensive to hold onto long dollar positions, which in turn supports the shilling.

The central bank said on Monday that it intended to mop up 17 billion shillings ($196.08 million) in excess liquidity from the money markets during the day.

Last week the bank mopped up a total of 32.2 billion shillings.

"I expect the shilling to be slightly up this week on tax payments by corporates, who will be selling dollars, as well as the central bank's aggressive mopping up," said Sheikh Mehran, senior trader at the Kenya Commercial Bank.

"I see the shilling trading at 86.45/55 by end of the week," he said.

KES= KES1=...........................Shilling spot rates

KESF= 0#KESF=.....................Shilling forward rates

EURKES= KESX= KESX1=.......................Cross rates

KES=KE..................................Local contributors

CBKINDEX.......................Central Bank of Kenya Index

KE/DEBT.....................Kenyan Bonds contributor pages

CBK03 CBK06 KE3MTB=...............Treasury bill yields

CBK04..................Central bank open market operations

CBK07.........................Horizontal repo transactions

KEIBR=, CBK02................Daily interbank lending rate

0#KETSYSTR=.............................Kenya Bond pricing

ECONAFRICA..................Real time Africa economic data

<ECI & AFR> ...........................African economic news

.NSE20 .................................NSE-20 Share Index

.NASI .................................NSE All Share Index

.FTFNKEN1 ...........................FT NSE Kenya 15 Index

.FTFNKEN2 .......................... FT NSE Kenya 25

IndexSPEED GUIDES:

REUTERS KES/1 KE/DEBT MONEY KE/EQUITY (Reporting by James Macharia; Editing by Susan Fenton)

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