Shilling extends losses as govt intervention fails to stop rout

Friday July 10 2015

A teller counts money at a Kenyan bank. The shilling on Friday surpassed the 101 mark to the dollar, extending its losses despite a more-than-expected interest rate hike by the Central Bank Tuesday.

The suspect was found with Sh200,000, say EACC officials. FILE PHOTO | NATION MEDIA GROUP

By JOSHUA MASINDE
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The shilling Friday surpassed the 101 mark to the dollar, extending its losses despite a more-than-expected interest rate hike by the Central Bank on Tuesday.

At around 1:30pm, forex traders quoted the shilling at 101.20/30 to the greenback, weaker than 100.80/90 at which it closed trading on Thursday.

The weakening is attributed to surging demand from manufacturing, energy and telco corporates, with the situation worsened by foreign investor flight from emerging markets such as China and South Africa and frontier markets such as Kenya, Uganda, Tanzania and Nigeria.

The situation has put policymakers in a dilemma given that they need to protect the economy against defaults while at the same time fighting inflation.

“Foreign investors are realigning their portfolios by shedding off investments from emerging and frontier markets such as ours to developed markets, where returns are stable and safer,” said Joshua Anene, a senior forex trader at Commercial Bank of Africa.

On Tuesday, the CBK raised the Central Bank rate by 1.5 percentage points to 11.5 per cent, a month after the rate had been raised by a similar margin to help prop up the shilling from extended weakening against the dollar.