The Shilling gained Thursday on the back of companies unwinding their dollar positions to make payments and investors selling hard currencies to buy local assets after a Presidential inauguration on Tuesday cleared uncertainty over the political situation in the country.
The shilling traded at 103.05/25 to the dollar on Thursday, stronger than the 103.15/35 it was at on Wednesday.
Traders said firms were selling dollars as business resumed from a two-month lull when Kenya teetered on the edge of a political crisis after results of the August 8 Presidential election were nullified by the Supreme Court.
“We are having good dollar supply from companies and off shore guys,” a trader from one bank told the Business Daily.
A decisive win by President Uhuru Kenyatta in an October 26 rerun vote, boycotted by the main opposition candidate Mr Raila Odinga, and his swearing in this week has diffused the uncertainty that had caused jitters among investors.
Better after polls
Kenyan markets have rallied since the conclusion of the rerun election, with analysts saying that they expected the economy to pick up into the New Year as calm returned to the markets and the government gets to work.
The protracted electioneering period, coupled with slowing credit growth and a drought that hurt food production early this year, had held the Kenyan economy hostage forcing the government to cut growth to 5.1 per cent this fiscal year from an earlier projection of 5.9 per cent.
ALSO READ: Shilling at two-month high on investor rush
The shilling has been relatively stable this year buoyed by a hawk-eyed Central Bank that intervened severally to mop up liquidity and sometimes sell dollars to commercial banks in a bid to cushion the currency from volatility.
The Central Bank of Kenya (CBK) said it was in the market on Thursday to mop-up Sh10 billion using reverse repos.
Traders said they expected the shilling to trade in the 103-103.50 band in coming days, but increased imports as businesses return to normalcy could weigh on the shilling in weeks towards the holiday season.
Kenya’s oil import bill hit a three year high in August, something that could weigh on the shilling if it keeps growing. The country is a net oil importer and a rise in crude prices on the international market has a big effect on consumer prices locally.
Data from the Kenya National Bureau of Statistics (KNBS) showed that oil imports rose 37 per cent in eight months to reach Sh176.8 billion at the end of August.
As a reprieve, remittance from Kenyans living abroad has also been on the rise this year, hitting an all-time high of $176.098 million in September, data collated by the CBK showed.
Traders said a hawkish CBK buoyed by a strong foreign reserves position, which stood at $7.081 billion – or 4.7 import cover— at the end of last week, would also be ready to support the local currency in case of any pressure.