CURRENCY TRADE

Shilling bows to importers demand, hits 108 to the dollar

Later in the day at 3pm, the shilling returned to below 108, trading at 107.91

In Summary
  • The Google currency trader tracked the local currency at Sh108.22 against the US dollar at 1pm, it had closed at 107.95 on Wednesday.
  • According to financial analyst, Mihr Thakar, the rate is driven by surging imports & input costs including shipping & an oil price rally in the county.
A cashier at a local Forex count dollars and shillings on 22 July 2020
A cashier at a local Forex count dollars and shillings on 22 July 2020
Image: Fredrick Omondi

The Kenya shilling on Thursday dropped to levels last seen in May as importer demand rose.

The Google currency trader tracked the local currency at Sh108.22 against the US dollar at 1pm, it closed at Sh107.95 on Wednesday. Later in the day at 3pm, the shilling traded at 107.91.

Financial analyst, Mihr Thakar said the rate is driven by surging imports & input costs including shipping and oil price rally in the country.

Thakar noted that the country's dollar index has also shown strong support at the 90 levels for the last seven consecutive months spelling doom for the local unit.

“In June, the index rebounded from a low of 89.65 to hit 92.44,” he said.

The dollar index is a measure of the value of the US dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners.

The shilling has maintained the 107-108 levels since May 24 when it was at 108.14.

In the week ending July 1 it remained stable exchanging at Sh107.92 per US dollar on July 1, compared to Sh 107.77 per US dollar on June 24 according to CBK's weekly bulletin.

The shilling has continued being buffed by the country's forex reserves which hit a year high last week.

The forex reserves held at the Central Bank of Kenya (CBK) rose by Sh218.06 billion ($2.02 billion) in the last two weeks to close last Friday at Sh1.024 trillion ($9.49 billion).

The data shows the jump, from Sh806.8 billion ($7.47 billion) two weeks ago, has sent the total reserves to a level last seen in mid-July 2021 (Sh1.04 trillion or $9.67 billion).

The increased forex reserves indicate the receipt of Sh107.94 billion ($1 billion) Eurobond proceeds, Sh80.96 billion ($750 million) World Bank loan and Sh43.94 billion ($407 million) from the IMF.

CBK Governor Patrick Njoroge said the disbursements provide adequate cover and buffer against short-term shocks in the foreign exchange market and cushion the shilling from volatilities