- Renaissance Capital has projected the shilling to close the month at 130 as the US dollar continues to strengthen.
- Importers who are currently buying a dollar at between 130 and 138, almost 10 units more compared to official Central Bank rates
Image: FREDRICK OMONDI
The Kenyan shilling on Friday dropped by almost a unit, the highest in past four months to touch a new low against the US dollar.
Google currency mapped the local currency at 128 units against the greenback compared to 127.29 recorded the previous trading day.
Cumulatively, the shilling has dropped 12 per cent against the dollar, the highest in two decades, pushing up the cost of living as importers struggle to consolidate hard currency.
Renaissance Capital has projected the shilling to close the month at 130 as the US dollar continues to strengthen. It has gained a massive 17 per cent in the past 12 months.
"The dollar is expected to continue with its charm offensive in the coming months, a move likely to further hurt weak currencies, piling pressure on already high inflation,'' the financial service advisory firm said.
It has predicted increased inflation in the next two months in Kenya before easing on expected long rains.
Increasing food prices and the weakening shilling continued to put households under pressure and raise the cost of living to 9.2 per cent in February, as some food costs went up to 11 percent more than they did in January.
Importers who are currently buying a dollar at between 130 and 138, almost 10 units more compared to official Central Bank rates have raised concerns of continued shortage, passing the increased import bill to end consumers.
The reserves are currently below the statutory threshold of an equivalent of four months of import cover weakening the country's buffer in the event of external shocks.
“The usable foreign exchange reserves remained adequate at $6,875 million (Sh865.9 billion) which is 3.84 months of import cover as of February ninth,” the CBK said in its weekly bulletin.
They are likely to drop further as the country intends to pay interest on several external debts in the coming two weeks.
The dollar strengthened further on Friday after U.S. Federal Reserve meeting minutes showed policymakers are determined to use a slower pace of interest-rate hikes to tame persistently high inflation.
The greenback rose in late trading, sending sterling down 0.58 per cent to $1.2036, while the euro fell 0.44 per cent to $1.06.
The dollar index was up 0.40 per cent at 104.57, easing off the high of 104.59 it reached earlier in the day.