CURRENCY

Shilling hits new historic low against dollar, falls to 109.16

In Summary
  • Yesterday, Google currency tracked the shilling at 109.16 against the greenback premarket
  • In 2018, IMF said the shilling may be overvalued by up to 17.5 per cent.
SOUGHT: The US dollar was in high demand yesterday from oil importers.Photo/File
SOUGHT: The US dollar was in high demand yesterday from oil importers.Photo/File

The Kenyan shilling yesterday dropped to a new low against the dollar, pushing up chance of the high cost of living  in the import depended country.

Google currency tracker maped the shilling at 109.16 against the greenback premarket before stabilising to 108.88 mid morning.

The value of the shilling  has in the past three months weakened against major currencies  as people opt to store wealth in stable  papers to cushion against Covid-19 economic turmoil. 

In Kenya for instance, rich individuals  seeking a safe haven for their wealth, stockpiled a record Sh45.5 billion in dollars in the three months to May upon the country reporting first covid-19 case and imposition of  restrictions to curb the spread of the virus.

Data by Central Bank of Kenya (CBK) shows that foreign currency bank deposits held by Kenyans rose to Sh671.4 billion, up from Sh625.9 billion in February, one of the largest three-month jumps.

On Friday, the shilling traded 108.75 against the greenback despite the Central Bank of Kenya (CBK) spending over Sh1 billion from forex reserves to iron out volatility. 

According to CBK’s weekly bulletin, usable foreign exchange reserves stood at $8.2 billion (4.99 months of import cover) as of October 22 compared to $8.3 billion last week or (5.04 months of import cover).

Dwidling forex cover amid shrinking diaspora remitances, the biggest forx earner for the country is likely to further expose the shilling to further volatility, putting the country's economy in a limbo. 

Data from the Central Bank of Kenya (CBK) shows remittance inflows in September stood at $260.7 million compared (Sh28.15 billion) compared to Sh29.7 billion sent in August and Sh29.9 billion in July.

The recent drop is coming at the time some countries especially in Europe are tightening Covid-19 restriction measures, fearing the possibility of the second wave of the virus that has since claimed 1.15 million lives globally.

Accoriding to money market analyst Bramuel Ashitiva, lack of enough cushion especially after the country's cautionary facility from the International Monetory Fund (IMF) expired in 2018 is likely to see the shilling close the week at 110 against the dollar.

''Imporeters' demand for the greenback is likely to pile more pressure on the shilling, a move thaqt is likely to see it break the 110 ceiling before Friday,'' Ashitiva told the Satr on phone. 

Others like Jacktone Kilio of Pesa Consult insists that CBK has been iflating the value of the shilling.

''Currency manipulation from top-down and confetti print and mint are to blame. The dollar will collapse all paper currency soon enough,'' he said on Twitter. 

CBK has varouosly refuted managing the shilling, saying the value is market driven. 

In 2018, IMF said the shilling may be overvalued by up to 17.5 per cent.