The shilling on Wednesday slid to a seven-month low as Kenya confirmed three more cases of the coronavirus (Covid-19), while the stock exchange recorded a marginal uptick in a second straight day of investor wealth gain.
The shilling was trading at an average of 104.15 units to the dollar Wednesday afternoon, compared to the closing rate of 103.72 on Tuesday.
The weakening of the local currency comes at a time when the economy is taking a beating from the pandemic that has hit stock markets, caused job stoppage and brought travel to a near complete halt.
Traders said the weakness in the shilling has been caused by the uncertainty in the market after Kenya reported its first case of the Covid-19 earlier this week.
“Our view of a depreciated shilling still stands, given the uncertainty surrounding the spread of the coronavirus in the country, as well as spill over fears from the global scene,” said NCBA in a note to customers.
There are lower dollar inflows into the country from agriculture exports and potentially diaspora remittances due to Covid-19 disruptions in global economies, thus denying the shilling a key source of support that has helped it remain stable in the past few years.
On Wednesday, Health Cabinet Secretary Mutahi Kagwe announced that the country had seven Covid-19 cases patients with after three more people tested positive for the virus.
The virus has hit the travel market, with restrictions announced on Sunday locking out residents of countries that account for 88 percent of foreign travellers to Kenya, hurting Kenya Airways and the wider tourism industry.
Fewer tourists have a direct impact on the available foreign currency and a negative effect on the local currency.
The Nairobi Securities Exchange (NSE) main index which had dropped to a 16-year low last week on foreign investor sales continued to show signs of resilience, supported once again by gains on Safaricom’s #ticker:SCOM share. Investor wealth as measures through market capitalisation rose by Sh3.7 billion Wednesday to Sh2.044 trillion, in tandem with the NSE All Share Index which was up by 0.24 points to 133.79 points.
The benchmark NSE 20 Share Index, which captures the movement of select blue chip stocks, however ceded ground as some blue chips failed to match Safaricom’s gains.
The telco added 25 cents to its price to close at Sh25.35 a share, while the other companies that make up the top five in the NSE by valuation all ceded ground.
Equity Bank #ticker:EQTY was down 25 cents to close at Sh39 a share, while EABL #ticker:EABL and KCB #ticker:KCB were down by Sh3 and 15 cents respectively to close at Sh172.25 and Sh41.55 a share.