The Kenya shilling is likely to lose ground against the dollar this year, despite its recent stability, analysts at Renaissance Capital have said.
In a new report released during the Renaissance Capital Annual East Africa Investor conference Wednesday, they tipped the currency to close the year at 105 against the greenback.
Yesterday, commercial banks were quoting the shilling at an average of 103.90 to the dollar in morning trading in the interbank market, compared to Tuesday's closing average of 103.86 units.
It has in recent weeks traded in a relatively tight range to the dollar, largely helped by record inflows from Kenyans abroad and liquidity mop up by the Central Bank of Kenya (CBK).
On Monday, CBK mopped up Sh56.2 billion through repurchase agreements in what was seen as a pre-emptive move ahead of a possible large injection of shillings into the market.
Speaking at the conference, CBK governor Patrick Njoroge said the shilling remains well anchored on a flexible exchange rate regime, only promising to step in to minimise volatility.
The CBK is also sitting on a large dollar reserve of $9.2 billion which can be deployed to iron out volatility on the weakening side.