The Kenyan shilling hit a new low on Wednesday morning to trade at 125.04 units against the UD dollar when the market opened.
The Google currency calculator shows the Kenyan currency which closed the market at 124.70 units against the greenback on Tuesday has been losing at least 40 basis points every day for the past two weeks.
Even so, the Central Bank of Kenya has indicated the shilling to trade at an average rate of 124.88 units today.
Although no reason has been given for the deceleration, money market experts believe that the drop has everything to do with the strengthening of the dollar, especially after last week's Fed rate review.
On Wednesday last week, the US Federal Reserve raised its benchmark interest rate by 25 basis points as part of its fight against inflation.
The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to between 4.5 per cent and 4.75 per cent.
In seven hikes, the US central bank raised the rate by a total of 425 points last year.
This has seen the greenback strengthen by 12 per cent, pilling pressure on weaker currencies as investors shift to stable markets.
Last week, FX Pesa predicted the shilling to close the month at 130 units against the US dollar, fuelling the shortage of the hard currency that has persisted for over six months.
Local banks are already selling the dollar beyond 130 units, with NCBA and Co-op Bank selling at a high of 136.
"Importers are struggling to get enough dollars to bring in goods. If this situation persists, the inflation which has softened in the past two reviews will likely return or go beyond October last year's level,'' Jerry Ogutu, a money markets expert told the Star.
His sentiments are shared by FXPesa's lead market analyst Rufas Kamau, who wants CBK to continue with the hawkish approach in addressing the monetary stalemate.
"While the Central Bank of Kenya (CBK) chose a dovish stance on policy tightening, an aggressive Fed is expected to further stretch the US dollar/Kenya shilling exchange rate which continues to worsen,'' Kamau said.
