The shilling weakened against the dollar yesterday after coming under pressure from importers, even as liquidity in the money market remained tight after banks transferred taxes to the regulator.
Commercial banks quoted the shilling at an average of 103.30 in afternoon trading, compared to Monday’s closing average of 103.21.
Traders said there was an overflow of dollar demand from oil importers from the end of last month, while merchandise importers were also active in the market.
The current tight liquidity has been seen to favour the shilling, helping blunt the effect of end-month dollar demand on the exchange rate. By end of last week, the excess cash reserves held by banks had fallen to Sh3 billion, which is the lowest since mid-February.
“…excess reserves decreased to Sh3 billion during the week from the previous week’s average of Sh7.2 billion underscoring the tight liquidity conditions,” said CBK in weekly bulletin.