I&M suspends online pound trade as currency drops 11pc on Brexit vote

I&M last week suspended sterling pound- and euro-priced online transactions after the volatility that followed the United Kingdom’s decision to exit the European Union.

The pound had shed 11.3 per cent against the shilling since the results of the referendum vote, dubbed ‘Brexit’ were declared a week ago.

The Central Bank of Kenya (CBK) quoted an average exchange rate of Sh134 for the pound Friday down from Sh150 the previous week.

“Our digital channels (I&M Mobile and I-Click Internet Banking) will temporarily not be able to offer GBP and Euro prices until the turbulent volatility abates within the global currency markets” said the bank in a statement sent out to customers.

During periods of wide swings the rates offered on the Internet may lag actual happenings causing losses to a bank customer buying or selling the currency.

Before Brexit the pound had been stable holding at an exchange rate of between Sh146 and Sh151 over the first six months of the year.

The CBK has sought to assure the market that it will intervene where necessary to stabilise the market.

The euro has not witnessed the volatility experienced by the pound and has been hovering around 112 to the local units.

Dealers, however, told the Business Daily that the demand for the pound was healthy as travellers and corporates sought to take advantage of the current rate. Some corporates were making advance payments indicating expectation of the currency to rebound.

Appreciation of the shilling is good news to importers but hurts exporters.

Trade between Kenya and her former colonial master is balanced.

Last year Kenya imported goods worth Sh40.6 billion from Britain while exporting Sh42.9 billion worth.

Exports to Britain are mainly agricultural products including flowers, coffee and tea.

“Despite diplomatic disputes, Kenya is likely to remain a preferred beneficiary of British foreign investment in agribusiness (tea, tobacco) and in oil and gas, with the UK being instrumental in the development of Kenya’s region-leading financial sector,” said South African research firm Exx Africa.

Risk-averse investors may, however, decide to run to safe havens leading to a capital flight and a slump in the money markets.

The pound immediately slumped to 31-year lows following the decision to exit the EU.