advertisement
Currencies

Shilling loses ground on dollar demand

forex bureau
A forex bureau in Nairobi. FILE PHOTO | NMG 

The shilling has retreated against the dollar in the past two days on the back of renewed dollar demand from corporate buyers.

Banks were trading the dollar at an average of 100.30 Wednesday afternoon, compared to 100.18 at close of trading on Tuesday. On Monday, they traded the shilling at an average of 99.65 to the dollar, a three-and-a-half year high.

Traders told news agency Reuters that dollar demand from the manufacturing and energy sector was rising, outweighing inflows from diaspora remittances.

The shilling had broken below the 100 level last week following a sustained period of inflows outstripping demand.

A trader told the Business Daily last week that buyers were also adopting a wait-and-see stance hoping to acquire dollars for fewer shillings if the appreciation held.

advertisement
 

Despite the paring back of gains against the dollar this week, the shilling remains one of the better performing currencies against the greenback in Africa in 2019 with a year-to-date gain of 1.7 percent.

Having seen the currency strengthen progressively in the past two months, Kenyan consumers are reaping a positive impact on the cost of imported goods.

Cost benefit

The most pronounced effect has come at the petrol pump, where prices of fuel have moderated significantly in the last two review cycles in part due to a stronger shilling.

Manufacturers have also reported seeing a cost benefit due to lower prices of imported raw materials, although those in the export business have also suffered an exchange hit when they receive their payments in dollars.

advertisement