After steady run, Kenya shilling weakens
Monday February 19 2018
The Kenyan shilling has weakened, after hitting a 20-month high early February. FILE PHOTO | NATION
The Kenyan shilling has weakened, after hitting a 20-month high last week.
This was attributed to the decline in overnight lending rates on the interbank market, which made it possible for the traders to increase their dollar holding.
The shilling was trading at 101.2 against the greenback at the close of the week.
It had reached 100.72 units on Thursday, the strongest level since early June 2016, having gained slightly from opening levels of 100.91/101.11 units against the dollar.
AIB Capital Ltd said the firming up of the shilling was due to agriculture inflows, high dollar liquidity from the January $400 million infrastructure bond issue and weak dollar demand from importers.
“We reiterate our outlook of a weakening shilling in the medium term informed by the expectations of increased demand for imports and a resurgent dollar,” said AIB Capital in their market update.
The Kenyan unit has this year seen a steady run against the greenback. The shilling has gained 2.16 per cent against the US currency since the beginning of the year.
Last year it faced tests from the prolonged electioneering period, which saw the Central Bank increasingly intervening in the market through the sale of dollars and withdrawal of liquidity to fend off wild swings.
The shilling touched lows of 104 to the greenback, but it was still one of the most stable currencies in sub-Saharan Africa in 2017.
Currently, the CBK has sufficient foreign exchange reserves that stood at $7.108 billion last week, to iron out any volatility of the shilling on need-basis.
That is the equivalent of 4.75 months of import cover, which is above the statutory requirement of four months imports cushion.
The Ugandan shilling was stable last week as the Central Bank mopped up excess liquidity through an overnight repurchase agreement and tax payments. It was trading at 3630/40 against the dollar.
The Tanzanian shilling is projected to remain under pressure due to demand for dollars from importers amid subdued inflows of foreign currency. It was trading at around 2255/60 to the dollar compared with 2249/54 the previous week.