Shilling falls to 101 against dollar on end-month demand
3 weeks ago, 14:56
The shilling last week depreciated 0.6 per cent to go past the 101 level against the dollar on the back of end-month demand for the greenback by importers.
On Friday afternoon the shilling was exchanging at 101.00/20 to the dollar on the interbank market, having opened the week at an average of 100.40/60.
Traders said end month demand for dollars by importers was putting pressure on the shilling, outweighing support from diaspora inflows.
The central bank was active in the market on Thursday selling dollars to forestall any volatility.
“We see the shilling holding within the 100.50 – 101.50 range as dollar demand continues to pick up amid increased vigilance by the central bank,” said Commercial Bank of Africa in a currency market note.
The pressure seen last week is, however, not expected to persist far beyond the end month activity period given the recent stability the shilling has shown against the dollar.
Support has come in largely from rising diaspora inflows and horticulture earnings, with the central bank dollar reserves of $9.13 billion having reassured the market that the regulator has enough muscle to step in and ward off volatility if needed. In the medium term though, the currency market will keep an eye on international crude prices which have recently risen to a three-year high due to geopolitical upheavals in Iran, with the potential to raise Kenya’s import bill and negatively affect the current account.
A wider deficit in the current account would immediately put pressure on the shilling, given that it leads to a strain on dollar supply in the market.
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