Kenya shilling extends fall as importers seek dollars
At 0729 GMT, commercial banks quoted the shilling at 85.10/30 per dollar, 0.2 per cent weaker that Monday's close of 84.95/85.15. FILE
What you need to know:
The shilling has dropped 1.5 per cent against the dollar since May 21 as importers bet that the currency's post-election gains had petered out. It is still 1.4 per cent stronger so far this year.
The shilling hit an eight-week low on Tuesday, pressured by importers' increased demand for dollars in the absence of matching inflows from exporters.
At 0729 GMT, commercial banks quoted the shilling at 85.10/30 per dollar, 0.2 per cent weaker that Monday's close of 84.95/85.15.
"There is a bit of panic buying by some players after it (shilling) weakened quite fast," said Peter Mutuku, head of trading at Bank of Africa.
"The dollar supply side is quite limited, but we're expecting to see some inflows from the tea exporters later today (Tuesday) and tomorrow (Wednesday) after the (tea) auction."
The shilling has dropped 1.5 per cent against the dollar since May 21 as importers bet that the currency's post-election gains had petered out. It is still 1.4 per cent stronger so far this year.
The shilling had rallied as much as 3 per cent since the March 4 presidential vote, which ran a peaceful course.
Some traders said the shilling's fall could also be a delayed reaction to a 100 basis point cut in interest rates on May 7, which has given commercial banks room to ease their lending rates.
Typically, a cut in the central bank's key interest rate would make it more attractive to hold long dollar positions and weigh on the local currency. Lower lending rates also drive demand for consumer goods.
