The Kenya Shilling touched new lows of Sh92.35 against the US dollar in what market players termed as a build up of demand. The local currency opened trading at Sh91.80 against the dollar before easing to Sh92.15 leading to jitters in the market over further fall. “Its been weakening on a sustained demand of the dollar mainly from the energy sector,” noted Mr John Muli a dealer at ABC Bank.
The demand from the energy sector has been noted as a monthly cycle as it happens every time an oil importation tender is announced. Players in the petroleum industry participate in a tendering system in which one firm wins the bid to import petroleum products on behalf of the industry.
The new lows come at a time when traditional dollar inflows for the country mainly the tourism and agricultural sectors are at off peak season. Kenya is one of the top destinations for tourists guaranteeing it substantial dollar inflows in the market. On the other hand, the agricultural sectors such as the tea and coffee are also big foreign exchange earners for the country.
“The traditional sources of inflows are not at the peak so the supply is thin in the market,” another dealer who sought anonymity told the Nation on phone. The pressure on the shilling, the Nation also established was as a result of relief food importation currently going on by a number of aid agencies and government.
This has resulted in increased demand of the dollar in the local market outstripping the available supply. Neighbouring Somali is currently facing famine, while the northern part of Kenya too is affected by drought. A number of aid agencies in the country are currently importing food and medical supplies for distribution in the areas on huge budgets.
Regional currencies have been taking a heat from the market demands especially on accounts of import bills. Most countries especially Kenya are net importers, therefore the demand of the dollar largely pulls down the home currencies.
In June, the local touched the rock bottom levels of Sh92 against the dollar in what was deemed to be a speculative attack. The shilling firmed up in July trading at averages of between Sh88 and Sh90 until last week when it started sliding. The current lows run is expected to last until the beginning of the fourth quarter of 2011 when traditional dollar sources enter peak seasons.
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