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Shilling firms to 102 as investors sell off dollar

Foreigners have been rushing to buy local assets as calm returns to market. FILE PHOTO | NMG
Foreigners have been rushing to buy local assets as calm returns to market. FILE PHOTO | NMG 

The shilling gained below the psychological 103 mark against the dollar for the first time since mid-September as foreign investors bought local assets and commercial banks sold the green back after calm returned to markets after two months of electioneering.

The currency traded at Sh102.75/102.95 to the greenback on Thursday, slightly stronger than the Sh102.80/103.00 it closed at in the previous session. It last touched this level on September 15, according to Central Bank of Kenya data.

“We have good dollar supply from foreign investors and banks unwinding dollar positions,” a foreign exchange trader at one commercial bank said.

“The shilling is supported by these inflows and periodic central bank interventions,” he added.

The continued firming of the currency is bad news for exporters but music to the economy that will pay less for oil and railway imports.

The shilling, which has been largely stable this year – down about half a percentage point so far, has gained 0.24 per cent so far this week after firming in four straight sessions.

Traders said firms were selling dollars as business resumed from a two-month lull when the country came to the edge of a political crisis after an August 8 Presidential election was nullified by the Supreme Court.

There are, however, concerns that the political cloud has not fully cleared as the main opposition leader Raila Odinga, who boycotted a rerun election on October 26 won by President Uhuru Kenyatta, has said he plans to be sworn as the President next Tuesday.

Mr Kenyatta was sworn in on November 28 after he won the rerun election by over 98 per cent of the cast votes. Mr Odinga’s inauguration plan has been termed treasonable by Attorney-General Githu Muigai.

“This political development on the back of lower market activity as the holiday season approaches could weigh on the shilling,” the trader said, adding that the central bank will be at hand to support the currency if it comes under pressure.

The Central Bank of Kenya (CBK) has severally intervened in the market to control liquidity by buying out shillings from banks using repurchase agreements and in some occasions selling dollars.

The CBK, whose foreign exchange reserves stood $7.099 billion – or 4.71 import cover – at the end of last week, stayed out of the money market on Thursday.

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