DEPRECIATION

Shilling falls to a near 5 - year low on high dollar demand

In Summary

•We should expect this to persist until October as people rush to exchange Sh1000 notes. Being end month, demand from importers has played a role too

A general view shows people walking past the Central Bank of Kenya headquarters building along Haile Selassie avenue in Nairobi, on October 9, 2017. /REUTERS
A general view shows people walking past the Central Bank of Kenya headquarters building along Haile Selassie avenue in Nairobi, on October 9, 2017. /REUTERS

The shilling weakened against the dollar to a near five-year low yesterday, hitting a day high of 104.35 on high dollar demand from importers and currency dealers.

The last time the shilling traded at these levels was on October 2, 2015, when it touched 104.40/50, according to data by money and capital market analyst website Wazua.

According to Google currency tracker, the shilling infatuated between 104.10 and 104.35. Even so, the Central Bank of Kenya valued the shilling at 104.07 from 103.85 Monday.

A money market analyst Jeff Kabeberi told the Star that normal end month dollar demand appetite from importers and excess supply of local currency due to demonitisation effects are in play.

‘’We should expect this to persist until October as people rush to exchange Sh1000 notes. Being end month, demand from importers has played a role too,’’ he said.

“The reason for the weakening is liquidity-driven, though we are now at the end of the month and increased end month dollar demand could also come into play,” said a senior trader from a commercial bank told Reuters.

Last week, central bank governor Patrick Njoroge dismissed the market’s concerns about excess liquidity in the money markets.