Shilling unchanged as market enters lull ahead of Christmas

The shilling has entered a lull ahead of the Christmas and New Year holidays with the foreign exchange market characterised by thin trading that could see the local currency close a tough year barely changed.

Traders said the shilling, which has been fairly stable this year supported by the central bank at a time a couple of headwinds hurt the economy, was set to end the year better than other regional currencies with a possibility of gaining against major currencies next year as the economy recovers.

It was quoted at Sh103.05/103.15 to the dollar on Wednesday, much unchanged from the close of previous session.

“In the week ahead, the local currency is expected to trade within the 103.00/103.50 range against the US dollar largely supported by the usual tight shilling liquidity conditions,” Commercial Bank of Africa (CBA) said in a market note.

The currency has had a bumpy ride this year faced by an uncertain political environment that saw the country go to its first ever presidential rerun on October 26.

READ: Shilling toughens against dollar as investor activity normalises

The fresh election that was won by President Uhuru Kenyatta lifted a cloud of doubt that had seen markets tumble as investors sought the safety of dollars and exited local listed firms at the Nairobi Securities Exchange.

The political crisis that engulfed markets since August forced the Central Bank of Kenya (CBK) to sell dollars to commercial banks to prevent any volatility on the shilling.

The CBK has also been actively mopping up liquidity using repurchase agreements to push banks to offload hard currencies.

There are, however, concerns that the political cloud has not fully cleared as the main opposition candidate Raila Odinga, who boycotted a rerun election, has said he plans to swear himself in as the President.

The shilling has depreciated about half a percentage points so far this year, a level it is likely to close at the end of December.