Shilling slides to new low

What you need to know:

  • This follows increased demand of dollars from corporates and energy importers.

The Kenyan shilling on Tuesday weakened to a new low following increased demand of dollars from corporates and energy importers.

At the close of trading, commercial banks quoted the shilling at 98.35/98.45 to the dollar, weaker than Monday’s close of 97.90/98.00.

National Bank of Kenya head of trading Chris Muiga said demand for the greenback has remained high. This is coupled with the rising imports relative to declining exports and the slowdown in forex inflows from the tourism sector.

In a report, NIC Bank analysts said: “The demand is seen from the energy and manufacturing sectors that usually come in to the market to buy the US currency towards the end of the month. The surge in dollar demand had curbed the impact of tight liquidity in the money markets, which was expected to offer support to the currency, by making it slightly more expensive to bet against the shilling.”

Analysts anticipate the pressure on the shilling to continue more so due to insecurity challenges facing the tourism industry and increasing demand from importers of energy and capital goods like machinery for ongoing infrastructure projects.

Earnings from the tea sector, Kenya’s largest foreign exchange earner, have been on the decline due to low prices of commodity in the international market. The price of crude oil in the international market is also on the rebound, albeit gradually.