Market News

Shilling steady ahead of Uhuru swearing-in

A man counts a wad of notes at a local forex bureau. FILE PHOTO | NMG
A man counts a wad of notes at a local forex bureau. FILE PHOTO | NMG 

The shilling held steady Monday on the back of sluggish demand as investors awaited President Uhuru Kenyatta to be sworn in for a second term.

The local currency traded at 103.25/45 to the dollar slightly off a two month high of 103.00/20 it touched on Thursday last week, but unchanged from Friday’s close according to Reuters’ data.

A trader at one commercial bank said there was “little activity” in the foreign exchange market ahead of a holiday to celebrate the inauguration.

Political tensions have stalked the shilling for the last two months after the main opposition presidential candidate Mr Raila Odinga challenged President Kenyatta’s win in a hotly contested vote.

A decision by the Supreme Court to nullify the presidential election shocked markets, sending the shilling and stocks tumbling as investors scampered for safety in dollars and bonds.

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

The Central Bank of Kenya (CBK) mopped up Sh15 billion from the money market yesterday to correct what it termed as skewed liquidity.

Kenyan markets rallied last week after the apex court dismissed two petitions that sought to once again nullify Kenyatta win at last month’s presidential rerun that was boycotted by Mr Odinga.

The shilling gained 0.6 per cent last week after the political cloud was lifted on Monday.

“The shilling strengthened against the US dollar but lost some ground to the Sterling Pound, the Euro and the Japanese Yen,” the Central Bank of Kenya (CBK) said in a weekly bulletin.

The currency is about one per cent weaker so far this year, but is relatively stable compared to currencies in other commodity exporting African nations like the Nigerian naira.

However, fundamentals have not been looking positive for the currency lately.

Kenya’s trade deficit widened by Sh215.6 billion in the first eight months of the year as the cost of maize and rail imports soared amidst flat export earnings.

Latest data from the Kenya National Bureau of Statistics (KNBS) show the cost of imports rose by 23 per cent or Sh216.3 billion to hit Sh1.156 trillion in the eight months to August, while export earnings only rose by Sh701 million or 0.2 per cent to Sh394.4 billion.