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"Traders said the shilling was trading in uncharted territory and was largely at the mercy of events in the euro zone."
Kenya's shilling sunk to a record low of 96.05 against the dollar on Tuesday on Europe's escalating debt woes and traders said the currency's tumble would test the Central Bank of Kenya's promise last week to defend the shilling.
The euro fell on Tuesday after ratings agency S&P downgraded Italy and as Greece held talks with creditors to avoid running out of cash within weeks.
"Internationally, we've seen a lot of risk aversion. People are moving to dollar denominated assets," said Solomon Alubala, head of trading at Co-operative bank.
Market players said all eyes were on the central bank after it vowed to defend the ailing shilling at an emergency rate-setting meeting last week.
The central bank has resisted publicly setting a target level for the currency, which has been battered by double digit inflation, a crisis of confidence in Kenya's monetary policy-making and global risk aversion.
Traders said the shilling was trading in uncharted territory and was largely at the mercy of events in the euro zone.
"It not clear at what levels we could trade in today. We are waiting to see what CBK will do," said John Muli, a trader at African Banking Corporation.
The central has bank has sold dollars twice this month -- its first sales of the U.S. currency in two years -- in an effort to support the shilling at around the 95.50 level.
The euro fell on Tuesday after ratings agency S&P downgraded Italy and as Greece held talks with creditors to avoid running out of cash within weeks.
"Internationally, we've seen a lot of risk aversion. People are moving to dollar denominated assets," said Solomon Alubala, head of trading at Co-operative bank.
Market players said all eyes were on the central bank after it vowed to defend the ailing shilling at an emergency rate-setting meeting last week.
The central bank has resisted publicly setting a target level for the currency, which has been battered by double digit inflation, a crisis of confidence in Kenya's monetary policy-making and global risk aversion.
Traders said the shilling was trading in uncharted territory and was largely at the mercy of events in the euro zone.
"It not clear at what levels we could trade in today. We are waiting to see what CBK will do," said John Muli, a trader at African Banking Corporation.
The central has bank has sold dollars twice this month -- its first sales of the U.S. currency in two years -- in an effort to support the shilling at around the 95.50 level.
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