August 15, 2014 / 9:57 AM / 3 years ago

Kenyan shilling flat on tight supply

NAIROBI, Aug 15 (Reuters) - The Kenyan shilling was steady on Friday, supported by tight supply that kept companies reluctant to buy dollars, traders said, adding that the local currency would probably ease once liquidity improved.

At 0900 GMT, commercial banks quoted the shilling at 88.05/88.15 to the dollar unchanged from its closing level on Thursday.

Some traders said the government has delayed the release of funds to departments and local authorities, causing a tightening of the money market.

“It is tight, and the tight liquidity is supporting the shilling,” said Nahashon Mungai, a trader at KCB.

“We are now trading (weaker than) ...the 88-level and in new territory. I think once liquidity is restored the shilling will weaken, it would be bearish for the shilling.”

Traders forecast the shilling was likely reach 88.30 once liquidity eased as this would encourage firms to buy dollars.

Traders also said dollar inflows have been scant. Foreign earnings from Kenya’s weekly tea auction have fallen due to over-production which has kept tea prices subdued this year.

Traders said tighter shilling liquidity was also a result of a new central bank cash reserve ratio cycle due to come into effect on Friday.

The central bank requires all commercial banks to keep 5.25 percent of domestic and foreign currency deposits as cash reserves. While the central bank allows commercial banks to go below that level, they are required to meet it by the 15th of each month.

...........................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:

Reporting by James Macharia, editing by John Stonestreet

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