Kenya shilling drum-up flops as local unit extends decline
Wednesday September 13 2023
Tier one banks recorded currency gains worth $100.14 million in the first half of the year due to the shilling’s depreciation against the local currencies. PHOTO | SHUTTERSTOCK
The Kenyan shilling has extended its losses against the US dollar to surpass its overall drop last year despite the revamp of the interbank forex market in March.
President William Ruto expected the re-opening of the interbank forex market to reinvigorate price discovery to yield gains for the local currency.
“For people who work numbers, I’m giving you free advice that those who are holding dollars, you shortly might go into losses. This market is going to be different in a couple of weeks,” Ruto said on March 13.
The move improved the access to foreign currency/dollars in the domestic money markets. But it has hardly cut losses for the shilling.
The local currency has booked losses of 21.6 percent against the US dollar from Ksh120.34 on September 12 last year to Ksh146.36 as of Monday this week.
Read: Kenya shilling hits 150 against US dollar
Despite expecting the unit to ease back to Ksh120 levels against the US dollar on improved liquidity in the interbank market, the local unit has posted losses of 13.21 percent since the president warned speculators.
The weakening of the local unit has been attributed to the emergence of a stronger dollar alongside the dip in Kenya’s official forex reserves.
With losses of more than 14 percent, the shilling’s slide on a year-to-date basis has surpassed last year’s nine percent drop.
Analysts widely expect the local unit to sink further by the end of the year on deteriorated macroeconomic and external factors.