The Kenyan shilling Thursday continued its slide against the US dollar, touching a new mean of 103 -- the lowest rate since January.
Official market data showed that the shilling stood at Sh103.25 to the greenback as at 3.45pm, a development that currency traders attributed to rising demand pressures mainly from oil importers.
Traders told Reuters that there was high importer demand mainly from oil companies.
“Kenya's shilling weakened on Thursday to a near 10-month low due to importer demand, especially from oil companies,” Reuters said.
The shilling last touched the mean of Sh103 to the dollar on January 17 this year, when the buying price stood at 102.94 against a selling price of Sh103.14.
Demand has been growing since early this week and is expected to persist in the near term as companies race to close this year’s orders before year end.
Commercial Bank of Africa (CBA) said on Monday that the shilling had ceded ground with only mild inflows. On Tuesday, the bank said the currency was weighed down by dollar demand even with foreign currency inflows from various sectors of the economy.
The Central Bank of Kenya (CBK) data showed that a depreciation of the local unit came as the official foreign exchange reserve declined by Sh7 billion in one week for a total of Sh32 billion in a month.
Some foreign exchange market watchers said that the pace of inflows had failed to match demand in recent days, leaving the shilling exposed.
“The pressure on the local unit was primarily driven by heavy dollar demand from merchandise and oil importers, which offset foreign inflows and diaspora remittances.
"Usable foreign exchange reserves held at the central bank declined by $69 million to $8.15 billion,” said Genghis Capital in a note.
The shilling’s depreciation began in earnest last Friday but only picked pace on Wednesday when the mean rate moved close to 103.
The CBK showed that it had closed the day (Wednesday) at a mean of 102.91, buying at 102.81 and selling at 103.01.
It slid further down a few hours after the markets opened Thursday with Reuters reporting that the market had swung between 102.95 and 103.15 to the dollar.
The reserves have fallen in the past few months from a high of over six months of import cover to the current level of 5.4 months.
Describing the shilling as not fully market-driven, the International Monetary Fund has asked the CBK to disclose its actions in the forex market as the current situation is such that reserves can change, even by big margins, but the monetary authority maintains a studious silence on its influence.