Kenyan shilling weakens as dollar demand grows

NAIROBI Tue Aug 12, 2014 5:26am EDT

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NAIROBI Aug 12 (Reuters) - The Kenyan shilling weakened on Tuesday as demand for dollars increased among manufacturers, energy companies and banks covering their short dollar positions.

At 0855 GMT, commercial banks quoted the shilling at 87.95/88.05 to the dollar, compared with Monday's close of 87.90/88.00.

"Manufacturers and energy players were in the market buying dollars, as well as banks who had gone short," said Sheikh Mehran, head of trading at I&M Bank.

The shilling has weakened since Friday, when banks started buying the greenback after signs that a domestic funding crunch was easing. Overnight interbank borrowing rates had risen over the past two weeks, when the government delayed releasing funds to departments and local authorities.

The central bank injected funds into the market from Tuesday to Thursday last week to alleviate the crunch. .

Traders said there were scant inflows, with some dollar sales of tea expected on Tuesday afternoon. Over-production has kept tea prices subdued this year.

Traders forecast the shilling would tend to ease in coming days and trade in a range between 87.80 and 88.10 against the dollar.

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(Reporting by James Macharia; Editing by Larry King)

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