CUURENCY

Shilling drops further to three month low on coronavirus fever

On Wednesday, IMF team concluded its visit in the country after meeting top President Uhuru Kenyatta and top Treasury and CBK officials.

In Summary
  • The Kenyan currency has been shedding almost 10 points since the start of the week
  • On Tuesday, US government was forced to slash its Federal Reserve Rate by a half basis point to help boost the greenback
The US Dollar notes./ELKANA JACOB
The US Dollar notes./ELKANA JACOB

The shilling on Thursday hit a three months high of 102.90 in a downwards trend exhibited since Monday when the Central Bank of Kenya announced to buy and stock dollar reserve.

The Kenyan currency which in September was hailed as among stable currencies in the world by global investment bank Renaissance Capital has been shedding almost 10 points since the start of the week, falling from 101.06 Friday last week.

The CBK's plan to buy $100 million every month till June ostensibly to solidify its FX buffer against global volatility worsened by the advent of novel coronavirus could likely see the shilling shed further, pushing up import cost and inflation.

Kenya is currently relying on its forex reserves to iron volatilities and manage inflation in absence of the International Monetary Fund's (IMF) precautionary facility which expired in September 2018.

On Wednesday, IMF team concluded its visit in the country after meeting top President Uhuru Kenyatta and top Treasury and CBK officials.

They hipped praises at Kenya's economy, fiscal plan and banking sector reforms, giving indication that it the international lender may renew the country's Sh150 billion standby loan.

On Tuesday, US government was forced to slash its Federal Reserve Rate by a half basis point to help boost the greenback which was also losing ground against other major currencies.

Speaking to the Star on phone yesterday, Bellamy Mugala, a budding financial expert said the shilling which has been rumored to be overvalued is likely t tumble further, pushing up the cost of doing business and general cost of living.

''The economic fever brought about by the spread of coronavirus and US's move to tame its inflation by slushing lending rates will defiantly have negative spiral effects especially on import depended countries like Kenya,'' Mugala said.

His sentiments are shared by Mihr Thakar who however thinks the drop in shilling is following the demand and supply curve.

''CBK is buying. Didn't you see the circular,'' Mihr tweeted. 

The Kenyan Shilling reached an all-time high of 106.80 in October, 2011 and a record low of 60.35 in November, 2007.