The Kenya shilling depreciated by 0.2% to close at to close the week at Kshs 121.8, from Kshs 121.5 recorded on November 3.
Forex traders attributed to increased dollar demand from importers, especially oil and energy sectors, against a slower supply of hard currency.
On a year-to-date basis, the shilling has depreciated by 7.6% against the dollar. This is higher than the 3.6% depreciation recorded in 2021.
“A fast-depleting FX reserve position has undermined the central bank’s support of the shilling,” NCBA Market Analysts said.
Currently, FX reserves can cover 4.1 months of imports, slightly above the statutory requirements of 4 months, as of 11th November 2022, from 5.4 months in 2021.
“The usable foreign exchange reserves remained adequate at USD 7,235 million (4.05 months of import cover) as at November 10,” the Central Bank of Kenya said in its Weekly Bulletin.
“Emerging concerns surrounding price discovery have led to the execution of trades at a ‘significant premium’ above the USDKES official rate,” notes NCBA Research in its Weekly Note.
“Even then, we expect the shilling’s depreciation to moderate somewhat by the end of the year, supported by improving sentiments as well as increased dollar inflows tied to tourism receipts in December.”
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