The shilling Thurday weakened as cautious foreign investors and companies watching presidential petitions hearings against President Uhuru Kenyatta’s win in a rerun vote held last month piled into hard currencies.
The shilling traded at 103.65/85 to the dollar at mid-day Thursday, weaker than the 103.40/60 it traded the previous day.
The shilling has been steady most of this year, shrugging off uncertainty from a prolonged electioneering period that threatened to turn violent after the apex court ordered a rerun of the August 8 Presidential vote.
A ruling on the petitions against the repeat presidential election being heard by the Supreme Court is expected to be made by Monday.
A previous decision by the court that annulled the presidential election shocked markets, sending the shilling and stocks tumbling as investors scampered for safety in dollars and bonds.
“They (investors) are just being cautious considering what happened last time,” said a trader from one commercial bank. “I expect the shilling to remain under pressure until this political cloud clears.”
Tight liquidity in the market due to persistent open market operation by the central bank, which periodically sold dollar to calm shilling’s volatility, has helped the currency to remain stable so far this year.
The Central Bank of Kenya said it was out of the money market Thursday as liquidity remained tight.
The shilling has depreciated about 1.6 per cent this year, which is marginal compared to currencies in commodity exporting African nations such as Nigeria.
Traders said a rising oil import bill for the country, which hit a three-year high in August, could weigh on the shilling if it keeps growing.
Kenya is a net oil importers and a rise in crude prices on the international market has big effect on consumer prices locally. Data from the Kenya National Bureau of Statistics showed that oil imports rose 37 per cent in eight months to reach Sh176.8 billion at the end of August.
As a reprieve, remittance from abroad has been on the rise this year, hitting an all-time high of $166 million in August, data collated by the Central Bank of Kenya (CBK) shows.
Traders said foreign reserves holdings at CBK, which stand at $7.1 billion – or 4.72 month import cover—could also be used to support the local currency in case of volatility.