DROP

Dollar rush sinks Shilling as traders fear tougher corona rules

Yesterday, Ali Khalpey of EFG Hermes said the drop is seasonal

In Summary
  • It closing the day at 108.63. 
  • The drop is, however, good for exporters especially in the agricultural who are now earning more. 

The Kenya Shilling dropped further against major international currencies on Tuesday as demand from importers heightened.

The local currency opened the day at 108.65 but dropped sharply by the hour, as demand for the global trading currency.

It touched Sh108.75 mid-day according to the Google Currency tracker before closing the day at 108.63. 

Traders attributed the drop to high demand by importers who are fearing stiffer Covid-19 restrictions by the Kenyan government as more severe variants hit the country. 

The number of new infection cases has been rising in recent times, hitting 1,085 on Tuesday pushing a total number of 205,356. At least 3,995 people have died from the virus in Kenya since March last year. 

The high imports rate continues to erode Kenya's trade balance internationally, with the deficit rising to 5.4 per cent in July from 5.2 in May. 

This is the highest trade deficit-  a measure of a country's trade with other nations - in two years since 2018 when the country recorded a 5.8 percent trade shortfall with international partners.

The current account deficit touched a decade peak of 7.2 percent of GDP in 2017 as the country dealt with election-related uncertainty.

The continued depreciation of the shilling is likely to further push up the cost of living for households as importers pass the hiked bill to consumers.

Kenya’s inflation quickened to 6.44 per cent year-on-year in July from 6.32 per cent a month earlier, the statistics office said on Friday.

On a monthly basis, inflation was 0.20 per cent from 0.12 per cent in June, the Kenya National Bureau of Statistics said in a statement.

The drop is, however, good for exporters especially in the agricultural who are now earning more. 

Yesterday, Ali Khalpey of EFG Hermes said the drop is seasonal, adding that the shilling will stabilize in the coming days. 

''No alarm. The Kenyan currency is quite stable. We expect no huge changes in months to December. The pandemic has held the greenback demand,'' Khalpey said.