Shilling holds steady despite high dollar demand

Lower dividend payout by corporates and intervention by the Central Bank of Kenya (CBK) has helped the shilling hold steady even as dollar demand rises, according to analysts.

The shilling held at a range of between 100.60 and 100.93 on Monday against the greenback, according to a Bloomberg News index that tracks the currency, a band it has maintained throughout the month.

This month is normally marked by dollar demand as firms, especially banks with significant foreign shareholding, close registers and buy the greenback for dividend repatriation.

According to CfC Stanbic Bank Regional Economist Jibran Qureishi, the current trend is explained by the fact that most companies chalked up below par performance last year and are thus paying less dividend.

“From our side, we see that corporate earnings were a bit low so that may be one of the reason unlike previous years where demand for foreign exchange was robust,” he said.

Rich Management CEO Aly Khan Satchu, however, said the fact that the shilling remained unshaken showed how strong it had grown, besides the confidence of the market in the Central Bank.

“The relatively light reaction by the shilling to the dividend payment season speaks to the underlying strength of the shilling. So, I think this dividend pay-out season will be a non-event for the shilling,” Mr Satchu said.

“Reserves are at a record and the market perception of the Central Banker’s bona fides are sky high,” he added.

Mr Qureishi said the shilling was propped by CBK, which came in last week to sell dollars in the market. “If you look at CBK statistical data you will realise that week-on-week, the reserves have slightly gone down.”