The last time the dollar deposits rose this high was in March when they had hit an all-time high of Sh779.7 billion as businesses and individuals hedged against economic uncertainty.
The latest increase — from Sh769.5 billion in September — has coincided with the depreciation of the shilling, which has fallen to a new all-time low of 112.71 units to the dollar, from 107.60 six months ago.
Kenyans upped their foreign currency deposits in local banks to a seven-month high of Sh773.8 billion in October, with a depreciating shilling helping boost the value of the dollar holdings.
The last time the dollar deposits rose this high was in March when they had hit an all-time high of Sh779.7 billion as businesses and individuals hedged against economic uncertainty during the Covid pandemic by turning to hard currencies.
The latest increase — from Sh769.5 billion in September — has coincided with the depreciation of the shilling, which has fallen to a new all-time low of 112.71 units to the dollar, from 107.60 six months ago.
The currency has been put under pressure by strong dollar demand from importers, amid a reluctance by those holding dollars to loosen their positions due to uncertainty over future depreciation.
“The movement boils down to two things — depreciation of the shilling at the time and investor positioning ahead US Fed actions in October as investors looked to cash in on higher rates,” said Churchill Ogutu, an economist at IC Group Limited (Mauritius).
“If you look at October the shilling depreciated 0.7 percent and dollar deposits gained 0.6 percent.”
The decline of the shilling has been a mixed bag, helping rich Kenyans holding dollar deposits, exporters and recipients of diaspora remittances while hurting importers and widening the value of the external debt.
The value of Kenyan diaspora remittances rose by 20 percent to $3.04 billion (Sh343 billion) in the 10 months to October compared to $2.537 billion (Sh285.9 billion) the corresponding period of last year.
Exports of commodities such as horticulture, coffee, chemicals, raw materials and manufactured goods have gone up by between 15 and 35 percent in the 10-month period, pushing up the total import earnings by 10.8 percent.
However, the rise in cost and demand of imported goods like cars, electronics, household goods and second-hand clothes has seen the import bill go up by 23.6 percent, thus widening the country’s trade deficit in the period.
