The Kenyan shilling depreciated to a record against the dollar attributed to increased import activities by local traders.
The shilling touched KSh 111.02 per US dollar on October 21, compared to KSh 110.81 per US dollar on October 14 according to data from the Central Bank of Kenya.
Besides its weakening, the CBK says “The Kenya Shilling remained stable against major international and regional currencies during the week ending October 21.”
The Kenya shilling has depreciated against the US Dollar by 2.4 per cent in Q3’2021, to close at Kshs 110.5, from Kshs 107.9 in Q2’2021a 9-months low. This is attributable to increased import activities by local traders as well as increased dollar demand across various sectors including energy amidst weak inflows.
Market analysts expect the local currency to remain under pressure as a result of increased demand from merchandise traders as they beef up their hard currency positions in anticipation for more trading partners reopening their economies globally.
Cytonn Investments also cite the rising global crude oil prices on the back of supply constraints at a time when demand is picking up with the easing of COVID-19 restrictions and as economies reopen.
Foreign exchange reserves have been declining in the last six weeks to stand at KSh1.02 trillion currently.
‘’The usable foreign exchange reserves remained adequate at $9.228 billion 5.64 months of import cover as at October 21. This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” said the central bank in its weekly bulletin last Friday.