Decline of the shilling is likely to lead to imported inflation where the prices of goods may rise as traders need more local currency to buy imports.
It piles reassure on fuel prices especially as petrol and diesel costs jumped the highest level in Kenya’s history.
The Kenyan shilling has hit a nine month low of Sh110.2 units against the dollar on higher import bill due to costly oil prices and global strengthening of the greenback.
The rise in crude oil from $42.35 a year ago to $72.34 a barrel this month means Kenyans need more units of the local currency to buy dollars pushing up demand for the greenback.
Oil imports accounted for 16.3 percent of the import bill at Sh190 billion in the seven months to July and its movement affects demand for dollars.
The Kenyan currency has been under continued pressure since June when it stood at Sh107.8 against the dollar due to the increase demand against reduced dollar inflow from key export earning sectors such as agriculture and tourism.
The dollar has also been bullish against global currencies as market rushes for safety amid fears the US Federal reserves will start cutting its bailout programme.
"The US dollar is having a bit of a rebound. Everyone is eying the Fed, waiting for a tapering signal,” Reuters said.
Decline of the shilling is likely to lead to imported inflation where the prices of goods may rise as traders need more local currency to buy imports.
It piles reassure on fuel prices especially as petrol and diesel costs jumped the highest level in Kenya’s history after the State discontinued a subsidy scheme introduced in April to ease public outrage over the high cost of living.
The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country.
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