Market News

Shilling gains ground as banks rush for local currency

The currency on Monday traded at a mean of 103.70 units against the dollar. file photo | nmg
The currency on Monday traded at a mean of 103.70 units against the dollar. file photo | nmg 

The shilling Monday gained some lost ground against the US dollar for the first time since October 13 as the country awaited the declaration of President Uhuru Kenyatta winner of last Thursday’s repeat poll.

The currency traded at a mean of 103.70 units against the dollar, a marginal gain from 103.85 at the close of trade on Friday, as banks accumulated shillings to meet prudential capital ratio requirements.

The Central Bank of Kenya (CBK) has attributed the weakening in recent weeks to increased demand for dollars by corporates due to market jitters over the repeat presidential poll, from which opposition leader Raila Odinga of the National Super Alliance coalition withdrew.

The shilling has remained relatively steady despite heightened political activity throughout the year, depreciating by only 1.18 per cent year through Monday.

“The shilling has been outstandingly resilient and is in positive territory for the year when you factor in the carry. It’s a mind-bogglingly positive performance when you set that against what was a white-knuckle political backdrop,” investment analyst Aly-Khan Satchu, who runs Rich Management, said via email.

Raphael Agung, head of treasury at Commercial Bank of Africa, backed the Kenyan unit to remain within the 103.50 - 104.50 band in the medium-term, citing sufficient foreign exchange reserves at the disposal of the CBK to intervene on need basis.

“The currency is stump-footing, we also have the central bank’s vigilance and they stand ready to intervene as they have done in the last couple of weeks. My sense is that going forward, we should be back to some sort of normalcy,” Mr Agung said on phone.

The performance, he added, will continue to be shaped by corporate demand which changes daily.