The shilling has fallen to near four-year lows, hitting 105 against the greenback in Thursday’s trading. PHOTO | FILE
What you need to know:
The shilling has been edging closer to its all-time low of about 107 to the dollar, set in October 2011.
At 0719 GMT, banks quoted the shilling at 104.90/105.10 to the dollar, weaker than Wednesday’s close.
Kenya’s shilling lost ground against the dollar on Thursday, weakening to its lowest level since October 2011 due to abundant local currency liquidity in the market.
At 0719 GMT, commercial banks quoted the shilling at 104.90/105.10 to the dollar, weaker than Wednesday’s close of 104.65/75.
The shilling has been edging closer to its all-time low of about 107 to the dollar, set in October 2011.
A trader at one Nairobi-based commercial bank said there was high liquidity in the market after the government released payments to state-linked entities and ministries, putting pressure on the local currency.
“The liquidity, coupled with heightened demand (for dollars) that has been constantly there, has seen the shilling go to four-year lows and the (weakening) trend look set to continue,” he said.
The shilling has received some support from Kenya’s central bank, which has in the past few months periodically intervened in the market to prop up the currency by selling dollars.
This week the bank has also regularly drained excess liquidity from the market.
On Thursday, the central bank said it planned to mop up Sh2 billion ($19.19 million) in excess liquidity from the money markets.
The bank uses repurchase agreements and term auction deposits to soak up liquidity, making it costly to hold dollars and in turn giving the shilling support.
The shilling, down 16 per cent against the dollar this year, has been under pressure from the dollar’s strength, Kenya’s high current account deficit and poor tourism inflows after a spate of attacks by Somalia al Shabaab insurgents.
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