BEATEN

Shilling races to 5-year low on Covid-19 effects

The government has appealed to members of the public to limit hard currency transactions to avoid the spread of the virus.

In Summary
  • The shilling has been falling against the week dollar since March 3 when it sharply sneaked into 102.42 margins from 101.17 the previous day.
  • The drop in the shilling’s value is likely to exert more pressure on inflation, with traders expected to pass the high import cost to consumers
MINTED: Kenya Shilling coins are scarce.Photo/Elkana Jacob
MINTED: Kenya Shilling coins are scarce.Photo/Elkana Jacob

The Kenyan shilling yesterday dropped to its lowest level since September 2015, on the expected drop of hard currency inflows due to coronavirus.

Traders told Reuters that the shilling, which dropped to 104.85 against the dollar per dollar down from 103.86 on Wednesday, is likely to shed further as the coronavirus effects kick in.

The shilling has been falling against the week dollar since March 3 when it sharply sneaked into 102.42 margins from 101.17 the previous day.

 

The dollar fell late on Sunday after the Federal Reserve stepped in to stem the global fallout from the coronavirus outbreak, led by a cut in interest rates to zero per cent, the second rate cut in less than two weeks.

The drop in the shilling’s value is likely to exert more pressure on inflation, with traders expected to pass the high import cost to consumers who are staring at a possible lockdown as confirmed cases of coronavirus hit seven.

On Wednesday, bankers announced a raft of measures to give a safety net to borrowers in a bid to insulate them from harsh economic impacts of the virus that has since affected over 200,000 people globally.

Apart from agreeing to extend the payment of personal loans, lenders led by Central Bank of Kenya (CBK) waived various fees on mobile banking and card transactions in support of cashless.

CBK governor Patrick Njoroge appealed to members of the public to limit hard currency transactions to avoid the spread of the virus. He said the currency would be quarantined for two weeks before being released into the market.

A fortnight ago, CBK announced plans to accumulate its usable foreign currency reserves above normal levels by making purchases of at least $400 million (Sh41.4 billion) across four months to the end of June to solidify its forex reserve against volatility.