Kenyan shilling strengthens against the dollar

Wednesday, November 13th, 2019 17:52 | By
Cash. PHOTO/Courtesy

The Kenyan shilling strengthened to a new four month-high against the dollar on Wednesday giving respite to importers while checking inflation pressures.

This was due to remittance and inflows from offshore investors buying shares on the stock market, traders told Reuters.

Commercial banks quoted the shilling at 102.05/25 per dollar, compared with 102.25/45 at Tuesday's close. The shilling last traded at its present level on July 4.

Kenya is a net importer especially of food and energy and a strong shilling helps the country to cut her import bill. Kenya does not export much except for her human capital.

“The last few days have seen a lot of sell side activities by foreign investors taking profit, the rate cap repeal is a good signal for foreign investors targeting undervalued counters,” said Michael Mwakio, a dealer at Suntra Investment Bank.

Diaspora remittances rose to an all time high of Sh30.4 billion in June compared to Sh25.1 billion in May proving to be a major support for the currency.

A stronger shilling will help reduce pressure on the prices of imported food stuff, machinery imports, fuel, fertiliser and other commodities.

 This however also means less demand for destination Kenyan as tourists seek cheaper options, while flower, coffee and tea also fetch less in dollar prices.

Analysts also said the currency is being supported by the scrapping of the rate cap. The repeal of interest rate is expected to lift the stock market as more money becomes available; this inturn attracts foreign investors who are the main players at the NSE.

Most of the remittances came from the United States where unemployment has dropped to record levels boosting job availability to foreigners.

The cutting of interest rates in the United States has also helped to increase money supply enabling Kenyans abroad to secure cheap funding for projects back home.

The currency is also expected to gain further as importer demand especially from energy and telecoms sectors fizzle out of the market ahead of the December holidays.

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