Shilling slides to four month low

The Kenyan shilling is now trading past the Ksh.109 mark to the dollar, its lowest in over four months since March 31 this year.

The Central Bank of Kenya (CBK) quoted the shilling at Ksh.109.01 against the green buck at Tuesday’s close with the local unit opening Wednesday at Ksh.109.05.

The steady weakening of the local currency is attributable in part to an increase in the demand for dollars alongside a funds surplus in the financial system over recent weeks.

At the same time, the Forex exchange rate has been affected by tight global financial conditions attributed to uncertainty with regard to the COVID-19 pandemic.

Nevertheless, the Kenyan shilling continues to record less volatility compared to most regional currencies supported in part by increased remittances and adequate foreign exchange reserves.

The South African Rand, the Botswana Pula and the Uganda shilling have for instance seen greater volatility in gains made across 12 months to June while the Rwandese Franc, the Nigerian Naira and the Malawian Kwacha have marked greater weakening.

The CBK has been stepping in to minimize any volatility in the unit to include heavy shilling mop ups this past week to squeeze out excess liquidity in the financial markets/inter-bank system.

The reserve bank has however taken a step back in the open market operations (OMOs) this weeks as August’s primary bond sale drains out some of the overbearing liquidity.

The shilling has remained stable across 2021 following a sub-optimal run in December last year.