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Shilling weakens further on rising dollar demand – Business Daily

A trader counting money. FILE PHOTO | NMG
The shilling ceded further ground to the dollar Wednesday, trading at a new low of 112.38 units amid the end of month demand for dollars from importers even as supply remained low.
It has shed value against the dollar in each of the past 42 trading sessions, triggering concern over inflation going up for households ahead of the financially demanding festive season.
Last month, inflation stood at 6.45 percent, having eased from 6.91 percent in September.
The shilling opened trading yesterday at an average of 112.35 to the greenback, before depreciating slightly in the day’s trading as has been the case in the last two months.
Traders said that those holding dollars are reluctant to loosen their positions out of concern about further depreciation, constraining greenback supply that would ease pressure on the local currency.
“Importers are looking for dollars to settle end month obligations, and are also accounting for higher orders ahead of the festive season,” said a trader.
The shilling has come under pressure following the reopening of the economy last month when the Covid-induced night curfew was lifted, with businesses reporting rising demand for goods that have translated to higher dollar demand from importers.
Demand for consumer goods has gone up now that there is optimism about the recovery of the economy, which expanded by 10.1 percent in the second quarter of the year. Consumers had been reluctant to spend during the worst of the Covid-19 months due to uncertainty over jobs and income.
With Kenya largely relying on imports to meet the demand for both capital and consumer goods, a weaker currency tends to have a pronounced effect on shelf prices.
Kenyans spent Sh1.53 trillion on imports in the nine months to September, an increase of 28 percent from the Sh1.2 trillion import bill reported for the corresponding period last year.
Hard currency inflows from diaspora remittances and agriculture exports have, however, helped shore up the shilling, with tourism receipts also expected to recover now that the economy is fully reopening.




Financial.co.kewas founded by Mr. Jospeh Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance.