Currencies

Dollar trading margins hit Sh10 in currency woes

Money-dollars

Kenya’s foreign exchange reserves dropped by Sh44 billion ($365 million) in August to Sh886 billion ($7.38 billion) on debt repayments. FILE PHOTO | NMG

The scramble for US dollars has seen a widening spread in the pricing of the foreign currency by a margin of more than Sh10.

The bid-ask spread -- the difference between the price a dealer buys and sells a currency – has increased from as low as Sh2 in March.

Bankers say clients are rushing to stock up on the dollar –the dominant currency in international transactions— and this has led to its gradual strengthening against the Kenya Shilling.

Most banks are now selling a dollar at between 123 and 126 units of the local currency while buying the greenback at 111 to 116 units of the Kenya Shilling.

The rates at which most customers are buying the dollar are substantially higher than the officially published mean of Sh117.4.

“There is a perceived demand of dollars. Hence to the market, the demand of dollars looks more than what it is, creating a sentiment on lack of dollars,” NCBA Group chief executive John Gachora said at a briefing on Tuesday.

“This has also seen auctioning to the highest bidder and the price of the dollar keeps rising because of that effect.”

A spot check done by Business Daily Tuesday at noon showed that KCB Bank was buying dollars at 111.15 and selling at 129.1 while Stanbic Bank was buying at 114.25 and selling at 125.45.

NCBA Bank was buying the foreign currency at 114.25 while selling at 125.85.

Equity Bank was buying at 114.4 and selling at 123.3 while GT Bank was buying at 116.25 while selling at 124.95.

The local currency has depreciated 8.1 percent against the dollar over the past 12 months in what has been attributed to strong demand for the hard currency.

Businesses from diverse sectors have complained of difficulty in accessing the dollar in quantities they want, forcing them to wait for days to weeks to accumulate the funds they require to make payments to their overseas partners.

Some have been unable to source enough dollars on a reliable basis, forcing them to scale down their operations.

A number of banks have resorted to borrowing dollars from their clients to fund their forex trading operations.

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