Market News

Shilling gains after Uhuru swearing-in clears doubts

forex

A trader monitors an electronic board at a local forex bureau. FILE PHOTO | NMG

Summary

  • The shilling traded at 103.15/35 to the dollar, stronger than the 103.25/45 it was at on Monday before markets closed for an inauguration holiday on Tuesday.
  • Traders said the inauguration had brought back investors’ confidence in Kenyan markets as the political cloud clears.
  • Traders expect the shilling to trade in the 103-103.50 band in coming days, but increased imports as business returns to normalcy could weigh on the shilling in weeks towards the holiday season.

The shilling strengthened Wednesday as foreign investors sold hard currency to buy local assets a day after President Uhuru Kenyatta was sworn in for a second term, concluding a protracted electioneering period.

The shilling traded at 103.15/35 to the dollar, stronger than the 103.25/45 it was at on Monday before markets closed for an inauguration holiday on Tuesday. Traders said the inauguration had brought back investors’ confidence in Kenyan markets as the political cloud clears.

“We are looking at positive political development. People who had previously piled on the dollar are unwinding,” said a trader at one commercial bank. “We’ve also seen increased demand from foreign investors.”

The shilling, which has been relatively stable this year, rallied last week after the Supreme Court dismissed two petitions that sought to nullify Mr Kenyatta’s win at last month’s presidential rerun boycotted by opposition leader Raila Odinga.

It came under pressure in September after the same court nullified an August 8 election and called for a fresh one in 60 days. The decision sent the shilling and stocks tumbling as investors sort safety in dollars and bonds.

The political tension that ensued forced the central bank to intervene in the market severally to mop up liquidity and sometimes sell dollars to commercial banks in a bid to cushion the shilling from volatility.

READ: Why Kenya remains attractive to investors

The Central Bank of Kenya (CBK) stayed out of the money market Wednesday. Traders expected the shilling to trade in the 103-103.50 band in coming days, but increased imports as business returns to normalcy could weigh on the shilling in weeks towards the holiday season.

“During holidays we get a bit of volatility because of low activity, but this year could be different due to the politics,” the trader added.

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 importers 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 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.