Shilling shrugs off government’s indecision on violence

Kenya’s shilling shrugged off a decision by the government to put off a decision on how to deal with post-election violence perpetrators and gained slight ground against the dollar today.
This morning, commercial banks posted the unit at 76.75/85 against the US dollar compared with 76.85/95 at the open.
Traders said the markets remained unmoved by the Kenyan government’s split on how to punish those behind the worst violence in Kenya’s post-independence history that killed at least 1300 people and displaced 300 000, Reuters reports.
“They couldn’t agree on anything so we are just waiting to see what happens,” said Kennedy Butiko, deputy head of treasury at Bank of Africa.
Butiko said if the Kenyan government refused to take action or to co-operate with the International Criminal Court, then traders would dump the local currency.
“That would mean the suspension of aid which means the shilling would weaken. The government would then have to come to the market to meet its commitments and the projects it would have no funding for would all come to a standstill. But as long as we are not at that point, the market will ignore it.”
Butiko said he expected the shilling to “take a beating” in end-of-the-month trade next week.
Standard Chartered Bank currency dealer Benson Kaburu said there was not much demand in the market but trade would increase next week.
“Next week demand will start picking up. Most negotiations are done at the end of the month, our market is seasonal,” he said.
Kaburu picked the shilling to weaken only slightly in the week ahead.
Currency traders said they saw the shilling oscillating in a band for the rest of the week, trading in a range of 76.50 – 77.50.