Kenya shilling steady vs dollar, seen easing in Jan

Written By:Reuters,    Posted: Fri, Dec 30, 2011

NAIROBI (Reuters) - The Kenyan shilling was stable against the dollar on Friday on thin volumes as most players closed their books for the year. The shilling has lost 4.8 percent this year, but has recovered from an all time low of 107 to the dollar hit in October thanks to steps taken by a central bank previously criticised for failing to stem the currency's fall fast enough. At 0843 GMT, commercial banks quoted the shilling at 84.80/85.00, from Thursday's close of 85.00/20. "There is little activity in the market. Most people are winding down the year," Dickson Magecha, a trader at Standard Chartered Bank, said. In a bid to contain double-digit inflation and a widening balance of payment deficit, the central bank has raised its key lending rate by 11 percentage points to 18 percent since October. That has tamed inflationary pressures -- which slowed for the first time since October 2010 to 18.93 percent from 19.72 percent in November, and lifted the shilling off record lows. But traders said they expected the central bank to keep the lending rate on hold in January, so as not to completely stifle economic activity. "They can only tighten so much without halting the economy," said Duncan Kinuthia, a trader at Commercial Bank of Africa. Going forward into the new year, traders expected the shilling to weaken on the back of importer demand, mainly from the oil sector. The traders forecasted the shilling would range 84-87 to the dollar in January. "Importers had stayed out hoping for better rates. We expect dollar demand to slowly pick up next year," Kinuthia said. Traders were also betting that the central bank was likely to put a hold on the CBR in the next meeting in January 11.