Kenyan  shilling

  (Reuters)

The Kenyan shilling slipped on Wednesday as importers took advantage of a run-up in the local currency as well as falling domestic yields to buy dollars.

Having strengthened during the previous two sessions, the shilling was quoted at 0738 GMT by commercial banks at 83.95/84.15 per dollar, down from Tuesday's close of 83.75/95.

"There has been a pile-up of demand for dollars from a cross-section of corporates below the 84.00 level," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

Traders said they expected the shilling to trade in the 84.00-84.50 range this week, with a bias to weaken further on the back of increased liquidity in the market, making it easier for banks to hold long dollar positions.

Yields in the money market have dropped in the last three weeks, with the weighted average interbank interest rate slipping to the single digit region at 8.2 percent on Tuesday from a high of 14.1 percent in late July.

The central bank, meanwhile, has been mopping up liquidity this year through repurchase agreements to support the shilling, which is up 1.4 percent to date.

"The shilling could be on the back foot because the yield play right now makes it very cheap for guys to hold dollars," Kinuthia said.