The shilling hit a two-month high Thursday as foreign investors buying Kenyan assets, in the wake of a Supreme Court ruling to uphold Uhuru Kenyatta’s win, sold hard currencies.
Commercial banks quoted the shilling at 103.00/20 against the dollar mid Thursday, a level last seen in September 15 and stronger than the 103.20/40 it closed at the previous session.
“We’ve seen a lot of dollar sales from foreign investors coming into local markets,” said a trader at one commercial bank. “If this persists the shilling could break through the 103.00 ceiling it has been hemmed under for most of this year.”
The markets have rallied since the top court dismissed two petitions that sought to nullify Mr Kenyatta’s win at last month’s presidential rerun vote boycotted by main opposition candidate Raila Odinga.
A September 1 decision by the court that annulled a presidential election shocked markets, sending the shilling and stocks tumbling as investors scampered for safety in dollars and bonds.
At the Nairobi Securities Exchange, share prices entered a bull-run backed by foreign funds rushing back to the market to buy counters they considered undervalued after a two-month stay-away that left the bourse subdued.
The shilling has gained 0.7 per cent so far this week after the political cloud lifted Monday. It has depreciated about one per cent this year, but is relatively stable compared to currencies in commodity exporting African nations like the Nigerian naira.
Tight liquidity in the market due to persistent open market operation by the central bank, which has sold dollars to calm shilling’s volatility, helped the currency to weather the political after-currents.
Central Bank of Kenya (CBK) said it was out of the money market on Thursday as liquidity remained tight.
Increased remittance from Kenyans living abroad, which hit an all-time monthly high of $176.098 million (Sh17.6 billion) in September according to the regulator, has helped the shilling weather the storm.
Diaspora remittances have become the largest foreign exchange earner for the country followed by tea exports and tourism earnings.
The country has so far this year received $1.382 billion (Sh104 billion).
Traders said foreign reserves holdings at the CBK, which stood at $7.11 billion – or 4.72 import cover—could also be used to support the local currency in case of any volatility.