Shilling stabilises after CBK injection

Experts say that events on the political front will determine the strengthening or weakening of the shilling. FILE 

By John Gachiri
 

 

The shilling remained relatively stable at the Sh85 level after the Central Bank of Kenya (CBK) intervened by selling dollars in the market to strengthen it.

Traders said that the shilling was flat in morning trade but in the afternoon lost ground marginally to trade at 85-85.50 units to the dollar.

The drop was attributed to trading positions, but they expect the Shilling to trade at the 85 units level.

“It will trade within a range but maintain a weakness bias,” said Duncan Kinuthia, of Commercial Bank of Africa’s forex trading desk.

The CBK’s intervention had seen the Shilling drop to 84.80 units, which was a reprieve after it had touched a two-month low against the dollar.

“The Kenya shilling strengthened against the dollar on Wednesday after CBK intervened to sell dollars directly to the market to prop up the local currency,” said a forex report by ABC Bank. ABC Bank’s forex report indicates that the shilling was trading at between 84.70 and 85.10.

Heavy demand from the oil sector, end month demand and more than normal demand had seen it trade above the Sh85.60 level.

Analysts said that the dollar should lose ground against major currencies due to the US stimulating the economy by releasing more money in the economy.

“The Americans have been easing more aggressively so the shilling is supposed to strengthen,” said Johnson Nderi, head of research at Suntra Investment Bank.

The shilling had gained ground after the conclusion of the March 4 general elections, which was settled by the Supreme Court but has since lost ground.

Economists say that its strengthening or weakening will be primarily determined by events on the political field, which have an effect on the flow of capital.

The CBK still has room to intervene given that it reserves have been rising. Kenya’s official usable foreign exchange reserves rose for the fourth straight week to $5.821 billion. Last week from $5.805 billion a week earlier.