May 20, 2018

The Shilling gains against the Dollar, but more needs to be done

Kenya shilling

By Telford Aduda

The Kenya’s shilling has gained strength against the dollar on Tuesday after the Central Bank sold dollars in the market for the second consecutive session, boosting the local currency as it neared its all-time low.

At the close of trade at 1500 GMT which translate to 6pm local time, commercial banks quoted the shilling at 105.45 stronger than Monday’s close of 106.15/35.

The Central Bank intervened at about noon local time after the shilling slipped to 106.60/70 against the dollar, almost touching the record low of 106.80 set in October 2011.

“The Central Bank intervention cooled the market,” said one Nairobi-based trader. Two other traders confirmed the Central Bank, which also sold dollars on Monday, had intervened.

Traders say the shilling, down about 16.5 percent against the dollar this year, is expected to break through the all-time low at some point this week.

In early trading on Tuesday, the shilling had weakened close to its all-time low, weighed down by corporate dollar demand and the U.S. currency’s strength on global markets, traders said. At 0722 GMT, the shilling traded at 106.60/70 close to the low of about 107, compared with 106.15/35 on Monday’s close.

Kenya’s Central Bank has in the past few months occasionally intervened to support the currency by selling dollars. It also regularly mops up excess liquidity. The bank also said on Tuesday it planned to mop up 11 Billion shillings ($103.43 million) in excess liquidity from the money markets. The mop-ups make it costly to hold onto dollars, which in turn supports the shilling.

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