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Shilling drops to a new historic low of 112.83 against US Dollar

Even so, CBK insists that the local currency is not out of line with other global legal peers.

In Summary
  • By yesterday, the shilling had shed nearly four per cent against the greenback
  • Money markets analysts say the Shilling, just like other currencies are feeling the heat of global inflation
A cashier at a local Forex count dollars and shillings
A cashier at a local Forex count dollars and shillings
Image: Fredrick Omondi

Kenyan shilling dropped a new historic low on Wednesday morning before gaining to Monday's level as the high demand for the greenback by traders heighten.

The Google currency tracker mapped the shilling at 112.83 a few moments past 9 am before stabilizing to 112. 49 at noon.

The shilling which opened the year at 107.23 has been losing ground against major world currencies despite numerous support by the Central Bank of Kenya to iron out volatilities.

By yesterday, the shilling had shed nearly four per cent against the greenback and 2.7 per cent against the Sterling Pound.

Money markets analysts say the Shilling, just like other currencies are feeling the heat of global inflation, with strong economies like the US and UK experiencing the worst cost of living in almost two decades.

The U.S. inflation rate rose to a 13-year high in September as rising costs for food and shelter pushed the rate up to 5.4 per cent.

In the UK, annual inflation in the U.K. accelerated to its fastest rate in a decade, hitting 4.2 per cent last month.

Back home, the weak shilling sent September inflation to the roof, hitting 6.9 per cent before easing marginally to 6.45 per cent in October.

On Tuesday, the Kenya National Bureau of Statistics (KNBS) said the cost of living eased to 5.8 per cent in November on reduced cost of petroleum products. 

Even so, prices of household products like sugar, maize flour and cooking oil have risen in recent days as importers pass high currency bills to consumers. 

The dollar scarcity which is activated by high demand in America and Europe as traders buy to stock for winter is expected to pile pressure on the cost of living this festive season in imports-dependent countries like Kenya. 

NCBA Bank chief economist Raphael Agung' said the weak shilling will not only push up the cost of living but also the debt servicing. 

Even so, CBK insists that the shilling is not out of line with other global currencies. 

According to CBK Governor Patrick Njoroge, while the shilling has shed three per cent of its value against the green buck in the year to date, the Japanese Yen, the Swedish Krona and the Euro have lost ground by 10.3, 9 and 7.9 per cent respectively.

''Closer home, the South African rand has shed 7.2 per cent of its value to the dollar with the Nigerian Naira and the Ghanian Cedi have shed four and 4.2 per cent of their values respectively,'' Njoroge said during a post-MPC media briefing on Tuesday. 

He added that in Africa, the South African rand has shed 7.2 per cent of its value to the dollar with the Nigerian Naira and the Ghanian Cedi having shed 4 and 4.2 per cent of their values respectively.

The only exception to the trend has been currencies including the Zambian Kwacha which has gained nearly 20 per cent after ‘significant changes to the country’s economy in the past 12 months.

“The question of whether we have been out of line with other currencies does not arise. Basically, partly and significantly, it has to do with the strengthening of the dollar against most currencies around the world,” Njoroge said.  

The CBK states that it has held its policy on non-intervention in the foreign exchange, only stepping in to stamp out volatility which would leave the economy susceptible to instability.