The Kenyan shilling firmed 0.8 percent against the dollar on Monday after the central bank said it was looking to mop up $52 million through repurchase agreements.

The Central Bank of Kenya has been busy taking out liquidity and selling dollars to support the shilling, which has fallen more than 3 percent against the greenback so far this year.

Traders expect dollar demand from importers, in particular the energy sector, to put further pressure on the shilling before the end of the month.

“We are at mid-month and some importer dollar demand may crop up, putting pressure on the shilling,” said Julius Kiriinya, a trader at African Banking Corporation.

At 0955 GMT, commercial banks quoted the shilling at 86.70/90 compared with 87.40/60 prior to the regulator’s announcement that it sought to mop up 4.5 billion shillings on Monday.

The Central Bank of Kenya has already mopped up 21.2 billion shillings in total through repurchase agreements and sold an unspecified amount of dollars this month, stemming the fall in the shilling.

Policymakers have been keen to stay ahead of the curve to avoid a repeat of last year’s heavy criticism for its perceived failure to take early action to support the shilling, which lost more than a quarter of its value to hit 107 per dollar in October.

The currency rallied after policymakers adopted an aggressive monetary tightening stance, raising its benchmark rate four times to 18 percent in December, but it has been on a downward trend so far in 2012. The central bank left its key rate unchanged at its January policy meeting.

Market participants said they expected the shilling to trade in the 87.00-88.00 range against the dollar during Monday’s session.

“There is some underlying dollar demand from the energy sector but it is well matched by inflows from horticulture and teal exporters,” said Sameer Lagadia, head of trading at Diamond Trust Bank.

Source: Reuters