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Kenyan shilling steady vs dollar, seen firming slightly

NAIROBI, Oct 4 (Reuters) - The Kenyan shilling

held

steady against the dollar on Thursday, and traders said a temporary liquidity crunch coupled by expectations of rising yields on government debt, would help to marginally strengthen the currency.

At 0730 GMT, the shilling was at 84.85./85.05, barely changed from Wednesday's close of 84.85/95.

"We are expecting it (shilling) to firm a bit since we saw interest rates rise yesterday," said Solomon Alubala, head of treasury at Co-operative Bank.

Typically, high yields in the debt market help tighten shilling liquidity, making it costly for commercial banks to hold onto long dollar positions. It also attracts offshore investors, increasing dollar supply in the market.

At an auction on Wednesday, yields on 364-day Treasury bills

rose to 10.570 percent from 10.336 percent at the previous auction on Aug. 29, while those on 182-day Treasury bills

edged up to 10.194 percent from 9.888 percent last week.

The central bank is due to sell benchmark 91-day Treasury bills

later on Thursday.

Alubala said the persistent absorption of liquidity by the central bank through repurchase agreements had also helped tighten shilling liquidity in the market.

As a result, the weighted average interbank rate had risen to 8.94 percent as of Wednesday, from 8.91 percent a day earlier, and from 6.40 percent on Sept. 10.

However, maturities from previous mop-ups were expected to trickle into the market in coming days, Alubala said.

A Commercial Bank of Africa report said the shilling would remain range-bound in absence of any fresh market-moving news.

...........................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

...........................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 Beatrice Gachenge; Editing by George Obulutsa and Susan Fenton)

((nairobi.newsroom@reuters.com)(Tel: +254202224717))

Keywords: KENYA MARKETS/