Kenyan shilling softens, but gains possible
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Kenyan shilling softens, but gains possible UPDATED 20 Jul 2009 | 11:01  
Kenyan shilling softens, but gains possible

NAIROBI (Reuters) - The Kenyan shilling fell on Monday thanks to appetite for the dollar from oil importers, but dealers said they expected the trend to reverse as exporters of farm produce convert their hard currency.

At 1000 GMT, commercial banks quoted the unit at 77.00/10 against Friday's closing level of 76.80/90.

"It looks like small demand from the energy sector (behind the move). We don't expect it to go higher. We are still expecting the shilling to strengthen," said Steve Lagat, a dealer at CFC Stanbic Bank.

He said that with the euro strengthening against the dollar, Kenyan exporters to the euro zone may sell their hard currency to buy shillings.

The dollar fell broadly on Monday, hitting a six-week low against the euro as traders flocked to risky assets on the back of speculation for solid corporate earnings that boosted share prices.

"We might see some (dollar) sellers at this level," said Kalpesh Solanki, a dealer at Ecobank.

Some traders, however, said any gains could be limited by local politics, with one possible source of nerves a cabinet meeting on Monday to discuss where perpetrators of the post-election violence of early 2008 should be tried.

Some analysts see justice for the 2008 violence as crucial to future stability in east Africa's largest economy -- facing its next poll in 2012 -- but others warn a judicial process may destabilise Kenya by stirring up old hatreds.

"The unit would be looking to chart new levels this week, with inflows expected into the bond market," a daily market report by the Commercial Bank of Africa said.

"However, politics and any significant up tick in end month dollar demand may limit the shilling's moves."

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