• Attributed to the demonitisation exercise and demand by importers.
Image: ENOS TECHE
The shilling yesterday slid into the Sh102 zone against the dollar before strengthening, an aspect attributed to the demonitisation exercise and demand by importers.
The Google currency conversion tracker mapped the shilling at Sh102.14 against the greenback at 10.55 am , 92 basis points more compared to an average of Sh101.20 at the close business on Monday.
Mombasa based financial risk and investment expert Mihr Thakar told the Star that an aggregation of factors led to an explosion of short term- demand including backdoor loot conversion in light of October 1 deadline to replace old Sh,1000 notes to new ones.
"Parties are attempting to avoid fallout from the impending demonitisation by moving through the formal system, albeit in an astute manner. They are fighting fire with fire,’’ Thakar said.
Reuters had earlier attributed the depreciation to high demand of dollars by merchandise and oil importers.
Financial Analysts Aly-Khan Satchu termed the variation as a meaningful move on twitter while others linked it to the recent exchange freeze order by Tanzania against Kenyan currency.
"Guess, it is the Bank of Tanzania announcement. Frantic panic dumping of shilling to get dollars? Twitter user Antivocative wrote.
The sudden jump may have prompted CBK to issue a statement alerting CEOs of commercial banks to ensure strict rules are followed when accepting old Sh1,000 notes to avoid money laundering.
"Financial institutions have a duty to prevent the financial system from being used as a channel to launder illicit funds. Commercial banks are therefore reminded of their Anti- Money Laundering obligations under section 44,45 and 46 of the Proceeds of Crime and Anti-Money Laundering Act, 2009,’’ CBK statement read.
The act requires the financial institutions to establish the true identity of a person transacting the money.
It also states that the financial institution should obtain the necessary identifications documents of the person involved in the transaction. They are also to establish the source and the purpose of the funds.
The shilling had strengthened to 101.39 against the dollar according to Google by the time of going to press. However, CBK quoted the shilling at 101.28.