Shilling takes a beating from rising insecurity fears

The Kenya shilling weakened further Tuesday over prevailing insecurity in the country and panic buying from importers.

Forex traders had expected the local unit to stabilise during the day after the Central Bank mopped up excess liquidity from the market to provide support for the currency that on Monday fell to its lowest level in eight months.

Dealers quoted the shilling at 87.75/87.85 at the close of trading yesterday compared to Monday’s close of 87.70/87.80. The traders said the unit remains vulnerable to insecurity fears, which have hit the tourism sector hard and reduced dollar inflows.

“The momentum has slowed down today (Tuesday) but the shilling is still vulnerable. CBK was aggressive today in the market compared to the previous day,” said Mr Joshua Anene, a forex dealer at Commercial Bank of Africa.

On Monday, the Central Bank mopped up Sh2 billion to support the local currency from further weakening.

Apart from uncertainty on the security front, pressure is also expected to emanate from importers and manufacturers with increased dollar purchase.

Kenya has faced a number of terror attacks in Nairobi and Mombasa, a situation that has seen the UK, US and Australia, the country’s key source market for tourists, issue travel advisories that have seen hundreds of tourists vacate the country.

On Monday most resorts in the South Coast reported low bed occupancy with fears that a large number would be forced to close down if the situation persists.

Operators called on the government to waive VAT imposed on the hotels to give them some breathing space pending recovery.